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This video answers this important question while providing some amazing tips that will help get your real estate investing business rolling in the right direction. Discover several proven strategies that can be used to form profitable partnerships in real estate investing.
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Should I Invest In Real Estate With A Partner?
Joe: Hey, it’s Joe Crump. This question is, “Should I invest in real estate with a partner?” Having a partner can be really valuable, especially if that partner is your spouse or significant other. Because you can work together, you can have your mindset kind of directed toward the same thing. It’s really nice to be able to partner together and work together.
Joe: Working with somebody who’s not a spouse can be a little bit more problematic, but I’ve seen a lot of good partnerships. I’ve not been great at partnerships overall in my business. I want to have my own business and be in control of my own business and the way that I work. I do partner with people but we do it on a joint venture basis, where we do it, you know, one project at a time. And sometimes I’ll do many projects with one person. But we keep those projects separate from my other businesses. So, they’re always in a separate LLC when we work together.
Joe: Also, I’ve seen so many people that have been good friends with people that have started to work together as partners and it’s destroyed their friendship. So, you have to be careful who you partner with and what the expectations are and make sure you lay it out carefully. What we do, whenever I partner with somebody, is we’ll set up an LLC specifically for that partnership so that it’s not connected with anything else that I do. I’ll fund that LLC. And we’ll also have an Operating Agreement that defines how that partnership works, how much each person gets, what happens in a default situation. I like to have control. If it’s going to be my money, I want to have control of my money, when it gets taken out, how much I get back, you know, and how all that works. Make sure that the division is fair to both sides.
Joe: You also have to know that the most important part of putting together a real estate investment or real estate business is finding the properties. Finding the deals and putting the deals together is more important than anything else. And I’ve seen a lot of partners who’ll get together and one person will be finding the properties, the other person will be finding the buyers. Or, they’ll be doing the computer work, or the admin work. That work is much less valuable than the person who is the rainmaker, the person who’s putting the deals together. That person is vital to the business. It cannot exist, that business cannot exist without that person, without that rainmaker.
Joe: But it can exist without the admin person. Because an admin person you can go and get for $10 or $15 or $20 an hour somewhere. You can go get somebody who knows computers to work for you for an hourly wage, which would be substantially less expensive for you than if you split the profits with somebody.
Joe: I’ve also tried working with real estate agents. I was a real estate agent myself. I still have a license. I’ve had a broker’s license for almost thirty years. But I don’t think it’s a great partnership to hire an agent, for example, to go out and help me sell a property on a lease option. I have to give them a big chunk of that lease option fee where I could pay somebody an hourly wage, maybe $15 an hour and it would take them maybe ten hours to sell a property for me, taking the phone calls, doing the showings, doing all the things that are necessary.
Joe: So, maybe cost me $150, $200, $300 maybe, if it’s worst case scenario, I can sell the property. But if I have to pay a realtor to sell a property on a lease option, they’re going to charge me usually at least one month’s rent. So, if it’s a property that’s $1,200 a month property, it’s going to cost me $1,200 to fill that property. And so, we’re talking three, four, five times as much to hire a realtor to do it.
Joe: Now, you don’t have to pay them up front and you don’t have to pay them unless they get the job done, which is good, but the likelihood that they’ll follow through is much smaller than somebody who’s doing it hourly. I find that people who are doing it hourly, they want to put in the time. And the way that I pay the people that are working for me hourly is to use the Automarketer and they use the phone system in the Automarketer, and the phone system keeps track of how much time they’re on the phone.
Joe: And if I’ve got somebody who’s doing phone work for me, I’m paying them 150% of the time that they’re actually on the phone. So, if I look at their stuff, I see that they’ve been on the phone for four hours, we pay them for six hours of their time, and my bookkeeper will send them a check when their time comes and for that six hours of their time.
Joe: And then we keep track of how much of that time goes to each property so we can kind of keep track of how much profit we’re making on each deal.
Joe: So, for me, working with a partner can be, is problematic. I’d rather work with joint venture partners versus full partners. Because then I can say this part of my business I’m going to work with you on. All this other stuff that I’ve got over here that I’ve been doing on my own, I’m going to continue to do those things on my own. And I’m going to be able to build that portfolio. And ultimately those things are probably going to make me more money because I don’t have to split it with somebody else. But, it’s nice to work with people.
Joe: You know, it’s nice. It’s good to have encouragement, it’s good to have somebody to talk to. It’s good to have, you know, to share successes, to share triumphs together. And so there’s some real value in that because it keeps you motivated. And I also find that people that work together, one person may be down that week and the other person may be able to kind of push this other person along. And then the other week this guy’s stronger. And she’s not as tough so he helps her. And they’re able to keep people, you know, keep each other moving when one of them gets down. So, there’s some real value in that. And if you’re working by yourself, that’s not as easy to do sometimes.
Joe: I’m lucky, I’ve gotten support from my wife and from my family and it makes it easy. Plus, I’ve got a team now that I know that they’re always kicking along as well, so once you build a team, those people will help encourage you as well, because you know, they’re there to get their hourly pay. And you know, they’re going to have, if you hire people with good attitudes, they’re going to have a good attitude for the process and want to make that job be successful and they want you to be successful because they know that if you’re not successful they don’t have a job anymore. So those are all things that really help.
Joe: All right, so if you like this video, please subscribe. Go to my website JoeCrumpBlog.com and sign up for the free newsletter. I give away a lot of free information on that site. PushButtonAutomarketer.com is the automation system that we use to find these properties and to manage our teams. It’s got some really wonderful team management tools in that program so check it out. And then also check out my mentor program ZeroDownInvesting.com. It’s a six month program where you work with me personally and I walk you through the process. It costs about as much as going to college first semester, so not cheap. But it’s changed a lot of people’s lives.
Joe: All right – Good luck to you.