In Real Estate Investing we see all forms of partnerships:
1. Success Coach: Two or more people getting together to support each other and hold each other accountable. No contracts.
2. Money Partner: This could be your bank, mortgage lender or a private individual that provides the funding for your transactions. Contracts include promissory note and a deed of trust or mortgage.
3. Service Partner: This could be one of your service providers that help you in the deal, the Realtor, the Title Company, the Contractor . . . etc. These can have formal documentation or not. These partners usually get paid a fee for their part in the deal, however, it they might be willing to work for an equity split of the deal.
4. Syndication: This can come in many forms, but is usually found when one person or company is the mover and shaker to put the deal together and partners with less involved partners who bring the money. They could put this all together in some form of corporate partnership or fund raising security document. Definitely need to consult with an attorney.
5. Partnership: This could be one or more people coming together to conduct business as one entity and take the step to formalize their partnership with each other through some sort of Partnership Agreement and Corporate Structure.
Lease Option Expert Wendy Patton has an excellent article on REIClub that discusses how she views partnerships: Partnerships for Real Estate Investing
In our office we consider all of our service providers as a team player. We don’t have a formal, written agreement, but they are no less part of our team. We have also informally partnered on deals for a time period. Where we all agreed that we would work together and had it all formally written on paper as to what we were doing, but we have not officially taken it to the step of forming a binding company with that person. When the time came that the partnership needed to end, we all agreed to no longer associate and do deals with each other.
We have also had quite a few money partners over the years. Their role was to make sure there was money at closing. For their troubles they received interest or equity split and were secured in the deal by a promissory note and a deed of trust. Our self directed IRA has also been a private money partner for a few people who needed short term funding for 2 days to 6 months and needed it in a small enough amount (under $70k) that we could provide the loan. Our IRA received a set fee or interest rate or a part of the profit, plus again the promissory note and deed of trust.
If you are wanting to be a partner or are wanting to find someone to be your partner, be sure to come to the MAREI meeting on May 12 to find out everything that David Nachman can share with you in about an hour. And if your partnership might be in the form of raising larger amounts of capital and pooling those funds, be sure to join us on the Private Money 101 Webinar with Gene Trowbridge on May 19th. Get all the details and register for both at MAREI.org