Partnering with others will reduce the amount of responsibility and time you alone need to dedicate to your real estate investment. Partnering allows you to spread your capital across more investments, more effectively diversifying your risk.
Partners can bring valuable, complimentary knowledge and skills to your investment. For instance, maybe you are the analytical left brain sort, are good with numbers, and following linear processes. But when it comes to negotiating with people like contractors, banks, or sellers you struggle to communicate effectively. Partnering with a social-leaning, right brain sort of individual could help you break through the barriers that are holding you and your business back.
The level of involvement you want to have will determine how much equity or sharing of the profit you will be entitled to from the business. Determine how you can best complement a partnership, whether that be with capital, knowledge/experience, or time.
If you have capital but little knowledge/experience or time, consider becoming a limited partner. A limited partner owns a portion of the business investing in the real estate, but has no decision making authority. As a limited partner, you will sign what is called a private placement memorandum and a subscription agreement, which will provide details of the investment, expected returns, and how and when you will be paid.
Today, most of these companies are established as a Limited Liability Company (LLC), but they can also be set up as a Limited Partnership, Limited Liability Partnership, or even a C Corporation.
An LLC established for the purposes of investing capital of limited liability partners will often be designated as a "manager-managed" LLC. This means that certain individuals or entities are designated as "managers" and others as "members". The managers will have full authority to make decisions on behalf of the company and the members will have little control over the actions of the company. This is why you want a good understanding of the manager's plan and track record before investing with them.
All-in-all, partnering is a great way to "get your feet wet" and into an investment with reduced risk and time commitment. At JW Equity Partners, we can help find the right investment for you.