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The Responsibility of the Managing Partner

Putting together a real estate investment group gives you a greater responsibility than buying alone. Once you have located a good property, formed the partnership and purchased the deal, there are still several items to be sorted out.

 

Sponsor Compensation

Here is a great opportunity for an investor to generate extra income. If it is allowed in your state without a real estate license, the investor who puts the group investment together can take a fee of several thousand dollars each time your investment group/partnership purchases a property. If you are the manager of the property, you can also charge a property management fee. While your group owns the property, you participate on a pro rata basis, determined by your ownership percentage, in any equity buildup. You also share in any cash flow from the property. Once the property is sold, you receive your share of the realized profit.

 

Property Management

If you take on management responsibilities, not only should you ensure the operating success of the property, you have an ongoing responsibility to communicate your activities to your partners. Each calendar quarter, you should send operating data about the property to your partners, and monthly communication is suggested to let the partners know you are still alive and give them updates on how the properties are doing.

 

Since your management duties will include maintaining the property, it is important to have sufficient capital reserves to handle any maintenance and repairs, as well as a good team of subcontractors who you can rely on in a pinch. Remember, as difficult as it may have been to line up partners and get the initial investment amounts from them, it is generally much more difficult to collect additional money from them for emergency repairs. It is always a good idea to open up an interest-bearing reserve account at the beginning of the venture to insure their will be adequate money for unforeseen repairs and emergencies.