Should You Join A Real Estate Partnership/Joint Venture?
Partnership in real estate or any venture is not a new idea. Many big projects can take shape because of partnerships or in the better terms consortiums. Most of the major real estate and infrastructure projects have been results of partnership between various companies. Real estate demands large investment and more the investment, more is the chance of making profit. So it is not at all a bad idea to get into a joint venture.
There are some things that must be clearly understood before getting into partnerships. The stability of partnership cannot be guaranteed. There are partnerships and joint ventures that have been lasting for decades and there are partnerships that hardly last the project. It automatically raises another question, whether investing with a partner in a reality project is a sensible proposition? The answer is not that simple. The factors that generally decide such partnerships depend on person, his solvency and trust. A known person is not always the right partner however close he might be. Also the investor must first set his goal. He must be fully aware about the time by which he wants his return, the amount of return and must also examine the offer of partnership and the reliability of such offers.
The first thing that should be the basis of any partnership is consensus. Remember that in a partnership no decision can be made by majority vote as in democracy. Until the partners agree on a matter it should not be proceeded upon as such actions can eventually lead to break-up of the partnership. Such break-ups can cause havoc to schedules when the matter is related to real estate. The result will be project delays and cost overruns and finally loss in the overall venture. This is not a way to do business. But if such a situation comes up when no consensus can be achieved then there must be a method to overcome the deadlock. The best way is to allow a third party to do the job of conciliation. He may be a consultant, any mediator or even a family member close to both the partners. But he should be influential enough to do the job.
A common way out is an agreement or deed of partnership. It should be a written document drafted by an attorney and acceptable to all the partners. The moment the deed is accepted the attorney will look after and be the attorney of the partnership. There are many types of partnerships like real estate investment trusts, tenant in common investment, limited liability partnership or limited liability corporation. You will have to choose from the one that you find most attractive.
To remain hassle free you can invest in a limited partnership as the liability is limited to only the invested capital. Also joining and leaving is no complicated affair and can be done anytime without dissolving the partnership. In such cases the general partners run the business and the profit is shared by all partners including the limited liability partners after deducting the administrative expenses and taxes.
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