3 Mistakes That Kill Property Investment Partnerships

I decided to enter a partnership with a very good friend of mine once.

We shared the same interests and a drink or two most weekends.

This went well at first.

You invest in a property you and your partner or partners believe will generate a good return. The only thing you don’t think about at the time is what could happen if things go wrong or even if they go better than you expected.

How is the profit and the responsibility for the venture split? How do you share the  burden when things go wrong?

My good friend and I continued in the property business for a while until little differences began to surface on how we viewed the partnership.

It soon turned out we both liked to be in control of decisions.

We began to clash on the smaller issues at first, which were soon forgotten.  

Then came a point when things were not going so well. This was the point where those small disagreements began to grow into wider cracks when cash flow pressures mounted.

Sadly the partnership and the friendship ended up broken beyond repair.

I was not alone. I heard another story about an investor who had made a decision to place an offer on a property he thought was a solid investment.

His partner reacted furiously because they brought their emotions into it. The partnership broke down because the dynamics were all wrong.

These are common stories I hear all the time. 

If you are investing in property there can be times when the returns, good or bad, are not what you and your partner expected at the beginning.

Property investment needs to be viewed as a long term investment just like any other business.

The return on investment will come, however patience and trust are the things a partnership needs to succeed.  

My failed property partnership hit a wall because my partner and I misunderstood each other from the very beginning. We didn’t have an agreement on paper to work from.

When problems started to surface we ignored them not wanting to bring up anything that would cause an argument.

So property investment partnerships usually end up failing because:

1.    Partners haven’t put anything writing

Who is the legal owner of the property? How do you both see the exit strategy? These are just some of the points to work out in a written agreement between you both.

At the beginning it is hard to see that you would ever have a disagreement with a partner, friend or a family member but financial pressures are a test for even the strongest friendships.

2.    Partners didn’t take it one property at a time

I have seen plenty of successful property partnerships that took it one property at a time. If you set up an LLC with a partner it may turn out to be a different story. Taking it one property at a time can limit the risk just in case the partnership breaks down in the future.

3.   A Partner finds out that their ‘friend’ is their enemy in disguise

How much do you know about the person you are about to invest with? You may know the person well or it could be a friend of a friend, either way it is worth looking into the track record of the person you are about to risk large sums of money with.

Just because that person is a friend of a friend, or has been recommended to you by someone, it doesn’t guarantee their trustworthiness when it comes to committing to the kind of lengthy partnerships involved in property investment.

Have you ever had a bad experience with a property investment partner? Please leave your comments below, I would be interested to hear your stories.

Kind regards

Brett Tudor
Property Expert

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