4 Key Factors That Determine A Compatible Co-Owner

By on March 23, 2017

As you move up the investment ladder and start to take up bigger and bigger deals to satisfy your appetite for real estate, you will inevitably start getting involved with partners and co-owners.

It’s just the way it goes in this business. You won’t be able to take a bite out of a big meal when your resources are limit as an individual.

The biggest factor then, for success in these projects is how well you get along with the co-owner(s).

I believe that most investors (if not all) would agree that the biggest negative impact a business can take is from a sucker punch from within. It doesn’t matter if that sucker punch is intentional or not. The impact can be detrimental as nobody can see it coming.

Sometimes getting into co-ownership agreements is a conscious calculated investment decision. Other times, you could be in a situation where you are forced into such partnerships.

When you have a choice in the partners you have to work with, here are 4 key factors to scrutinize in order to identify the most suitable and compatible co-owner to work with and form a team.

1) Resources

This is self-explanatory. In fact, resources could very well be the very reason you are seeking co-owners in the first place.

Big projects can take up a lot of time, effort, and money. Things that you have a limit on when you are on your own.

This is the time when you reach out for other real estate investors who either have:

  • more experience in a particular area
  • more funds to splash around
  • more expertise in managing the type of property
  • more friendly acquaintances in a specific niche market
  • more expertise in tax planning
  • more manpower that will make operations a breeze to manage
  • etc

Finances in particular is a key component when scrutinizing resources. You want to know as much as possible about the financial position of a partner. And you must urge a prospect to disclose as much as possible.

This is so that you do not get involved with those who are already laden with historical, current, or future debt.

That can throw your whole investment into a chaotic state.

2) Location

There are many reasons why you would want a partner who resides near the property in question. Just like you.

This makes it easier for both of you to get involved in a hands-on manner whenever the need arises. This also removes the excuse one might make of being too far away to be too involved in managing the property.

Being in the vicinity also brings about the possibility that he/she might have knowledge regarding the area which you had overlooked. This could add a lot of value to how profitable a deal eventually turns out to be.

Other than that, being nearby makes it more convenient to meet up and discuss operations issues… and more investment opportunities.

3) Objectives

Ideally, you would want to work with someone who has the same goals as you.

Depending on your personal preferences, it might be even better if he/she is at the same stage as a property investor as you. This is so that neither of you feel inferior to each other and takes on your roles responsibly.

Bare in mind that you might have a long term view regarding an investment while a partner might have a short term one. This really depends on life goals.

For example, a partner could be planning to go overseas in the near future. This would mean that he/she would either sell off the stake, or that you would be left all alone to manage the property.

In case of the latter, you should consider hiring a property manager to manage the place and split the expenses accordingly.

4) Character and personality

Does the prospect have a track record of failure or of screwing his partners?

A lot of people get involved with bad partners fully knowing their questionable histories. They feel that the partner has changed and would not dare screw them. And then, they are left holding the ball in future wondering what went wrong later.

When it comes to business, never let your ego cloud your judgement. If someone is proven to be unreliable, don’t make the mistake of thinking that person would never screw with you. Because by the time, such a thing happens, there usually would be no remedies save your investment.

Other than character, the personality of a partner also has to be compatible with yours.

You don’t need to be an ideal match according to your horoscopes. But you do need to have rapport with each other and comfortable enough to discuss tough issues in an honest manner.

Working with someone you can get along with could be a major factor that determines success and failure.



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