When describing partnerships, let me first describe how my dad and I began ours. My dad and I have been investing in mobile homes with land since 2011. However, we didn’t start out planning to partner together.
How My Partnership Began
I had been bit by the real estate investing bug, specifically mobile home investing, after reading Lonnie Scruggs’ Deals on Wheels. I bought my first deal (just a mobile home) using my own cash and my dad gladly helped me make the repairs to the home on weekends. I got a second deal (this time, a mobile home with the land) under contract and really had no clue how I was going to pay for it.
I had read a ton of real estate books in the couple of months leading up to this and kept reading that if the deal was good enough, the money would come. The deal was good, but I didn’t realize that very few banks would make loans on these homes to investors.
I had planned to get an expensive personal loan to pay for the acquisition, but luckily my dad stepped in and used his HELOC to purchase the property, thus officially beginning our partnership.
Status and Layout of the Partnership Today
Over time, we began to split duties to the point we are at today. I tend to handle most of the computer work (customer service emails, posting/taking down listings, finding new properties, etc…) while he handles any incoming customer service phone calls and manages contractors and handymen.
Other than that, we fill in for each other as needed. Both of us travel for our jobs so it’s nice that either of us can step in and run the business smoothly when needed.
The Most Important Question to Ask
Can you do as many deals and be as profitable separately than you could together?
Both partners need to bring something important to the table. Partnering for simply splitting up duties is not desirable as it’s cheaper to hire some help rather than giving up 50% of your equity.
For us, my dad’s strong income and credit has made it fairly easy to access various lines of credit to acquire more properties. I had the motivation and enthusiasm to grow a real estate business that my dad probably wouldn’t have otherwise. So separately, I may have done a few deals but would be extremely limited in terms of borrowing power and he probably wouldn’t have gotten started.
Partnership is a Marriage
For those who are married, you know that your marriage requires constant communication and compromise. The same can be said for any successful business partnership.
My dad and I talk daily about the business discussing what’s currently going on and what are strategy is for the near future. We do have to compromise at times, especially with different personalities.
For instance, when dealing with tenants, I tend to be much tougher than he is. We had one recently who kept delaying switching the electricity into her name. I was ready to turn the electricity off within a week of moving in (as our lease states that we can) but he kept giving her more time. In the end, we both learned a lesson about enforcing our lease.
That’s the great thing about having a partner with differing ideas. You tend to try more strategies but in the end, you keep the ones that work best for your business.
Short Term Versus Long Term
Our partnership started out as a deal-by-deal partnership. That’s how I would recommend those starting out arrange their partnerships.
Get a true feel for a partner by doing a few deals together and see if you work well with that person.