The basic idea behind using partners in your real estate investing business is that if you don’t have the money or the credit, you can partner with someone who does to provide the necessary financing for your real estate investment properties. There are many people wanting to get into real estate who have the resources to get involved, but do not know how. This is where you can partner together to make some profitable deals happen.
There are a couple of ways that you can structure a partnership. Traditionally you supply the property, the partner puts up the money and you split the profits when it is sold. Another option is to have the partner put up the money as if it were a loan. The partner would make interest on the loan (which would be higher than other places they could invest that money), and you would be able to keep the profit for yourself. You could also take a synergistic approach to increase your available funds by assembling a group of several investors and pooling all available funds together to enable you and your partners to purchase more, which in turn makes more profit for all of you.
A Private Investor is an investor that will give you a private loan and allow you to repay the loan with interest or agreed upon fees. With this type of investment you can make more money as you get to keep a bigger chunk of the profits, but there is usually a repayment deadline associated, so you have to have a clear exit strategy when going into the deal so you can get in, sell, make your money and repay the loan.
A Cash Partner funds the transaction 100% and you partner in the deal. Since you are splitting any gains or losses there are usually no deadlines as to when you have to return the principal money, but you will make less money this way since you have to share in the profits. Your Cash Partner is more than just an investor lending you money for your investment purposes; they actually serve as your business partner in each transaction you participate in. They will be involved with decisions on purchasing particular properties, finding buyers, and putting up the required funds to secure the property. You may not want to have a business partner in your real estate investing business; partnerships are usually better as a short-term vehicle for generating some cash flow rather than as a long term strategy. Handle a few deals this way to generate some money and you will probably have the funds you need to venture out on your own.
There are several ways to locate a Cash Partner. Some of the people who might fit this profile include:
- Retired people who have a little extra money and are possibly looking to grow that money through a rental or investment property.
- Someone you know who already has existing investment properties; they are probably looking for more.
- Real estate professionals already working in the business that have the desire, but not the time required for investing.
- Stock market investors wanting a more stable return than the stock market can provide.
- Dentists, doctors, attorneys or other professionals who have money and don’t know how to invest in real estate.