Real estate investing is a business that often attracts loners and mavericks. Freedom from bosses and co-workers is often as much the motivation for going full-time as is making gobs of money.
But we’ve noticed that many of the most successful investors we’ve met usually end up in partnerships, whether they are temporary of permanent.
So we thought it would be good to talk about our experiences and observations when it comes to putting together powerful business partnerships.
Partnering up in the studio to produce this powerful episode of The Real Estate Guys™ radio show:
- Your howdy partner host, Robert Helms
- His hoe-down co-host, Russell Gray
Power could be described as the ability to create motion. Planes, trains and automobiles are powerful. So are rockets, tanks and bulldozers.
People and animals can be powerful too. Think about a strong man who can move heavy weights, or a big plow horse tearing up fallow ground.
But people are unique when it comes to power. It’s more than brute force. Sometimes people are powerful because they can make things happen through persuasion, planning or effective decision making. These skills put other people in motion. It’s why a CEO or national leader is powerful.
So when it comes to real estate investing…and really business in general…the ability to get things done with and through other people is powerful. But sometimes it’s overwhelming or beyond the scope of one’s personal skills or resources.
That’s where having partners comes in. The right partners can bring critical skills, perspectives, relationships and resources to any endeavor.
But the wrong partners can bring strife, distraction, confusion and chaos. If you’ve ever been in or around a bad partnership, you know how awful it can be. There’s still energy, it’s just not positive, organized and focused forward.
The same power that can launch a rocket into space can blow up a city block. The difference is focus and control. Ditto for a trained and harnessed horse or a bucking bronco.
So how do you make sure you get into positive, effective partnerships?
First, it’s important to have an alignment of mission, vision and values. It sounds trite, but it’s not.
Your mission, vision and values are your guidance system. They keep you focused and channeling your energy towards specific outcomes.
So it’s important when considering a partnership to spend time first just getting to know YOURSELF. Then into having an HONEST conversation with your prospective partner. Be careful to stay true to your MVV no matter how attractive the partner is. No amount of money is worth hating who you look at it in the mirror every day when your brush your teeth. There are lots of people in the world. Take the time to find partners who share your MVV.
Next, you have to make sure you TRUST your partner and vice versa. Keep in mind that trust is a two-sided coin.
One side of trust is ethics. It’s critical that your partner is trustworthy. Not perfect. God didn’t make any perfect people. But transparent enough that you know who and what you’re dealing with. You need to know that you’re partner is the same even when you’re not looking. And that he or she has your back when things go sideways (as they always do).
The flip side of the coin is competency. It’s great to have an honest, transparent partner. But if he’s incompetent, then he’ll feel bad when he blows it. But he’ll still do damage.
Conversely, a skillful, but unethical partner, will surgically separate you from your money…and maybe your relationships and reputation.
So make sure your partners are both ethical AND competent.
It’s also really important to play a fun game of “what if” with your prospective partner. As in, “what if this or that happens?”. While it isn’t possible to anticipate all the variables, it’s worth talking about how you’ll handle things when there are disagreements or unintended outcomes.
When you get to deciding how to put the deal together, try to be clear about what needs to be done, who’s going to do it, and how all the compensation will be handled. Simply going through this process can often flush out potential problems way before there’s real risk involved.
If your prospective partner doesn’t value you or your contribution fairly, or isn’t willing to take on their fair share of risk and responsibility, you may want to think long and hard about that partnership. If you’re already feeling it’s not fair in the planning stages, how will you feel when you have real blood, sweat, tears and cash going out? Resentment will be your constant companion and that can kill the positive energy you need to be effective.
When you finally get through all the dating and you think it’s a match, then take the time to document the major deal points in an MOU (Memorandum of Understanding). Some people think it’s an old-school badge of honor to do a handshake deal. We think it’s better to get few bullet points down and make it clear about your Mission, Vision, Values; who’s contributing what and roles and responsibilities; how money will be handled and how decisions will be made. And very importantly, how disagreements will get settled.
Usually (and remember, we’re just talk show hosts, not lawyers), you’ll want to form a legal entity. Your tax and legal advisors can walk you through all of that, but your aforementioned MOU will help them create your entity’s Operating Agreement or By-Laws. Having done the work up front with save you a TON in legal bills.
Sound like a lot of work? It is. But a few pounds of hard work on the front end can save you several tons of pain later. It’s like the old carpenter’s adage: measure twice, cut once. Like failed marriages, business divorces can be ugly and expensive. They’re to be avoided.
Here’s the good news. A great partnership can be worth a lot more than your partner’s weight in gold. Even if he or she is chubby.
So how do you attract a great partner? By being a good partner. Be the kind of person a powerful partner would want to work with. Work hard. Be honest. Develop skills and valuable relationships. Be attentive not only to your own needs, but the needs of others.
It’s really no different than in any kind of relationship. And the right partner won’t expect you to be perfect. Keep that in mind when you’re looking for and working with a partner.
People are package deals. If you want all the good stuff, you’re probably going to have to accept some stuff that bugs you. Just make sure those things aren’t deal breakers for you.
The best news is that when you get good at putting together power partnerships, you’ll find yourself doing more better, bigger and faster than you ever dreamed. And you’ll find that your slice of a partnership pie is probably a lot bigger and better tasting than the tiny pie you would have if you went it alone.
So tune into this episode and discover how you can create power partnerships to do more faster!
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