What to Find Out About the Deal

The majority of our partners get high level details about the deal(s) we are investing their money in, but most of them never go out to see the property. As their partner, I am fine with that, but as your investing coach I highly recommend you ALWAYS go and check out the deal yourself. It's not about second guessing the expertise and experience of the person you're working with, it's about covering your butt. Remember - nobody is going to love your money as much as you do - so make sure that what you're investing in is exactly what you think it is.
 
Look at the property to identify work that might be required in the near future. Walk the neighbourhood to make sure it's a good market to invest in (does it meet the Market Research Checklist items?). And ask any questions you might want to know about how the property will be filled with tenants (who is doing that, how do they screen tenants, what do they look for in tenants).
 
Finally - determine if there are alternate exit strategies for the property.
 
Right now we're focused on rent to own deals but all of the deals we're doing will be at least neutral cashflow even as a regular rental if it comes to that, and many of them can be sold at a break even point as well (because we bought them under market value and have done a bit of work to increase the value). So we have other ways out of the property if, for whatever reason, our original strategy for the place doesn't work. Make sure there are options for your deals too.

Other Details to Consider

We're creating an entire program on partnering for profits because there are so many items to consider when you're doing joint ventures but in addition to everything above here are few things I think MUST be in place on every joint venture agreement:

• A written joint venture agreement prepared by a reputable and real estate specializing lawyer,
• An agreement as to how long (approximately) everyone commits to be in this deal - with the understanding that things do change and some sort of clause in the agreement explaining how an unplanned exit from the partnership is to be handled,
• Clear expectations of roles and responsibilities for the partnership,
• How often and what will be communicated - because everyone's idea of good communication is different.

If you want to invest in real estate and want to get your money working for you while you learn, finding someone with experience to partner with might be the perfect solution. However, you have to make sure you're getting what you need from the partnership. Joint venture partnerships work best when everyone brings something to the table. Whether you're bringing money, expertise or some other important resource to the table, it's important to understand what you want from the deal and what the other person is going to provide. And do your due diligence. Because nobody loves your money like you do!!
 

Published August 11th, 2010

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