First Rental Property

Hi Everyone,

Many new real estate investors ask themselves the following question when they first start out investing…

“Should I invest in my first rental property by myself, or should I partner with someone MORE experienced?”

Sometimes new real estate investors fear ‘going it alone’ and purchasing their first rental property by themselves.  As such, they partner with someone just for the sake of having a partner.  In many of these newly formed partnerships, there may not be any value that either partner brings to the transaction.

For example, let’s take a look at the following scenario.

We have 2 independent real estate investors.  Each investor is too afraid to invest by themselves in a rental property, and as a result, they form a partnership and invest together.  Further, the level of knowledge of these 2 investors is about the same, as they are both at a novice level.

This is an example of a real estate partnership in which there is no value brought to the table by either of the investors.

When considering getting involved in real estate partnerships, one has to examine what REAL value they bring to the table.

Value in real estate partnerships can come in 3 forms.

They are…

TIME

KNOWLEDGE

MONEY

Time

Time is an important variable in effective real estate partnerships.  Simply put, in an effective real estate partnership, you have one partner who does not have any time, yet wants to invest in real estate.  The other partner will have available time on their hands to manage every aspect of the real estate transaction.  This person is often referred to as the real estate expert.  (As an example, I am the ‘real estate expert’  in my real estate joint venture partnerships.)

Knowledge

Knowledge is an equally important variable in good real estate partnerships.  There will often be one partner who wants to invest in real estate, however may know very little about real estate.

The other partner, will have a great deal of knowledge in a specific real estate market.  They will know the prices of houses and the market rents inside and out in that geographical area.  They will also have a  solid real estate team working for them, consisting of a mortgage broker, real estate lawyer, and quality Realtor, just to name a few.  (As an example, I posses all of the knowledge as the ‘real estate expert’ in my real estate joint venture partnerships)

Money

Money is without question an important variable in effective real estate partnerships.  Using the traditional example, there will often be one partner with the money to invest in real estate, but no time or knowledge.

On the other hand, there will be the other partner (real estate expert) who invests the partner’s money into the real estate transaction, and has all of the time required to successfully manage the investment as well, they will possess all of the knowledge required in order to pick great rental properties in excellent locations.  (As an example, I take on the role of the ‘real estate expert’ and I invest my partners’ money in our real estate transactions)

What other variables make an effective real estate partnership?

You can leave your comments in the comments section below.

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Onwards and Upwards!

Neil Uttamsingh

[youtube]http://www.youtube.com/watch?v=2tKQfbQOq5E[/youtube]

ps: Thank you to The Versatile Investor, Mark Loeffler for giving me the idea for this blog post.