Do’s and Don’ts of Real Estate Investment Partnerships By Robert Jenson

LAS VEGAS, NV--Partnering with others on a real estate investment is a great way to create new opportunities.


However, while partnering in real estate investments can be a financial and lifestyle boon, there are many nuances one must understand before taking the real estate partnership plunge, cautions Robert Jenson, (top right photo) founder and the primary Realtor at The Jenson Group in Las Vegas, NV.

Below are some basic “Do’s and Don’ts” of real estate joint ventures:

Do’s:


Put everything in writing: It’s imperative to document all deal terms, arrangements and agreements. Mutual understandings that are clear today may become murky years down the road, so thwart potential conflicts by writing all plans out in advance.

Plan ahead: Even before the deal is done buyers should map out a yearly property usage calendar in advance along with schedules for cleaning service, payment of utility and other bills and the like to ensure everyone will be in agreement before being locked into a mortgage. This should also include when to pull money out to purchase another, when to sell and other such concerns.

Anticipate challenges and obstacles: Might you have to evict a tenant? Is your vacation property in a declining market? Is your partner no longer able to make their share of the mortgage payment? Plan for worst case scenarios in advance and have contingencies in place.

Create an exit strategy: How will the group decide when it’s time to sell the joint venture property? Will there be an option for one partner to buy the other out and, if so, how exactly will that work? Planning the property sale is equally as important as planning for its purchase. Put all options on the table – and in writing – before signing on the dotted line.

Taxes: It’s wise to treat the property and partnership at large like a small business, with monthly Profit and Loss statements. Who will take advantage of the write-offs that property can provide? Will this be split 50/50 or other arrangement? Meet with your CPA before the purchasing to determine the tax and other fiscal implications of the purchase.

Don’ts

Don’t attempt to execute the deal amongst yourselves. Purchasing property is a complicated financial transaction. A buyer’s real estate agent can appropriately structure the price and terms and otherwise save the group time, hassles and money in the process. Hire an attorney to legally structure the partnership.

Don’t rest on the laurels of the relationship: Because you know and perhaps even love your partner(s), don’t be lulled into a false sense of security – treat the transaction like the serious business deal that it is.

Don’t play the blame game: One the ink is dry and escrow has closed, it’s time to function as a team, particularly when the going gets tough. When problems arise, rather than blaming and pointing fingers, remember you’re all working toward the same goal and that, ultimately, everyone wants to get the problem resolved.

Don’t let your partner slide: Is your partner not holding up their end of the deal? Or are you just doing far more work on the yard or home improvements than you had agreed to…in writing?

Rather than getting angry and argumentative, simply pull out the documentation you [hopefully] put in place at the onset to remind the partner of his or her obligations. Your last resort, unfortunate recourse would be to take the matter up in a court of law.

Robert Jenson is the founder and primary REALTOR® at The Jenson Group of RE/MAX CENTRAL - a premier luxury real estate agency specializing in the sale and purchase of upscale residential property. He can be reached through his Web site at http://www.thejensongroup.com/.