Real Estate JV Partners: The Pitfalls, Promises and Potential

by Dave Peniuk & Julie Broad

Marriage and real estate partnerships aren't that different. There's a courting period, there are things that each person has to bring to the table to make it work, and there are as many problems as there are possibilities for success.

In real estate investing, just as in a marriage, there are many ways that a partnership can fail. If you rush into a relationship without dating or doing your due diligence you may find that you're not as compatible as you once thought. You may find that you and your partner end up having different objectives for the relationship. One of you may oversell what you're bringing to the relationship. Or, maybe things change, and one of you just decides it's time to move on.

There's plenty of ways a partnership and a marriage can go wrong. It can get messy and it definitely can be stressful and emotional. And it can happen when you least expect it. And it can feel like there was no warning.

We're no strangers to turmoil in our real estate partnerships. While the majority of deals we've done have been with partners, and they've gone very well, there are always new lessons to be learned.

So, if there's potential for so much turmoil with partners why bother? Why not do all of your deals solo?

Well, just like the right partner in your life can make you happier, more fulfilled and even more successful, the right partner in your real estate deals can allow you to do bigger and better deals with reduced risk.

In fact, the right partner can bring any one or more of these positive things to a joint venture:

• Skills and Expertise: For example, if we decided to get into flipping properties we'd be interested in partnering with someone that has experiencing working in the trades or working as a contractor. Someone that has never invested in real estate before may wish to work with someone with experience on their first deal.
• Money: Most of our deals involve us bringing our expertise and experience to the deal and doing all the work in exchange for a partner putting up most of the initial capital required.
• Financing Options: On a recent deal we were unable to secure the kind of financing we wanted so we brought in a partner who could. Sometimes the best way to look good to a bank is to bring in people that fit into their tiny little box of lending requirements.
• Risk reduction: Having additional parties involved in a deal allow everyone to carry a lesser share of the risk on a deal. It reduces each persons exposure and downside should something go wrong.
• Network: In the past we partnered with someone that had a gigantic network of high net worth individuals. This guy knows someone in just about any field and could get them on the phone pretty quickly.

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