The Art of PartnershipsPosted on September 2, 2014 by
When most people start out in the real estate business they don’t have all the money they need to buy all the properties they want to buy. I may be describing you and I am certainly describing myself when I got started. If you don’t already have all the cash you will ever need to buy properties then you will need to meet the right people (investors and sponsors) to help you get your investing going.
Meeting great people is just the beginning to creating great business partnerships but it certainly is not the only aspect of the art. Here are some things to keep in mind when networking.
Friends are great but there is much more to a successful business partnership than just liking someone or getting along with them. I am friends with all of my close partners but the relationship didn’t start that way. When you first meet a new contact you should be asking yourself two questions.
What do they bring to this relationship?
What do you bring to this relationship?
A good partnership is based on both parties bringing something to the table that the other doesn’t have or can’t bring. An example of this would be money. If you are getting started in the apartment business you may need a partner to bring net worth or maybe experience to your team to help you get started. This partner would fill the “sponsor” portion of your team and definitely brings value to the relationship. In order to attract a sponsor you need to bring something of value to them. This could be the fact that you are a expert in your local market. It may be that you have 40 hours a week to find deals. You need to ask yourself…what do I have that would get them to join me in a partnership. If you don’t have a great answer then you have your work cut out for you.
Not correctly qualifying potential partners is one of the biggest mistakes I see people making at networking events. I see people who meet other people, they like each other and form a partnership based on that. If the person you have met doesn’t bring something quite different than what you have to the relationship then it is probably best to just remain friends and keep your options open. Don’t immediately commit to a partnership just because you like them.
When I am talking to new students who have just met a potential partner I usually ask “what does your new partner bring to the relationship that you really need?” Most of the time the student will say something like “they’re good at networking” or “they are going to call brokers and I am going to find all the money”. These are not good reasons to partner with someone. A good partnership is not based on one person just doing something the other doesn’t want to do.”
You should be calling brokers, establishing deal flow, networking and finding money for your deals all by yourself. If you and your partners share in these activities then I would suggest that you form a mastermind group to help hold each other accountable, motivate and to share ideas with, not a partnership that costs equity.
When you are starting out you will need to form relationships with people who can definitively move your business forward. Here are some things that I like for and think about when I am taking on new partners.
Do they have contacts with people that I would want to know or be connected with in the future?
Do they have experience in an area that I don’t? I don’t know how to build houses. If I wanted to I would find a partner who does.
Do they have available funds or net worth that allows me to do more deals or bigger deals?
Do they have operational or management experience that I don’t have?
Do they have any experience running their own business?
Do they have systems in place that would allow me to move my business forward if we partner?
The final step to finding a good partner is to be valuable yourself. You need to bring something to the table that a good partner would want. Remember they are asking themselves the same questions about you. One of the things that I work on the hardest to create value is producing great deals. I don’t personally raise much money anymore because I have certain partners who do that. We make a great team because when I find a deal I bring it to them and they take it to their money contacts. This allows me to do what I do and allows them to do what they do. You need to figure out what you do best and find partners to do the rest. If you can get along with your partner and they bring equal and opposite skills to the relationship then you are likely to have the beginnings of a great team and business.