Investing With A Partner Can Be A Smart Move

I try to invest in Real Estate in different areas to avoid putting all of my eggs in one basket. Spreading your investments around can help you hedge against the possibility of declining value in a particular neighborhood. If you were to buy all of your Real Estate in one area, and it became a bad neighborhood over time, it could present disastrous results to your Investment Portfolio.

An Investment Partner could be the key to multi-property diversification. A partner can cut your expenses in half allowing more property deals to take place. For example, lets say you had $200,000 cash to invest. You could buy 1 moderately sized home using all of your capital or you could use the money to buy 2 small homes for $100,000 each. An Investment Partner contributing 50% of his own capital would allow you to double the number of homes in the fore mentioned example thus allowing you to spread your capital investment over a wider area. The cost of ownership is also cut in half making this type of investing attractive to those with limited cash reserves.

It is important to note that Partnerships don't always work out. It is important to find a partner who thinks the way you think. If your partner's personality is very different from your own, it could spell trouble. A plan should also be implemented so all parties know what their responsibilities are. Someone will usually take the lead due to location of the property or because they have an expertise or skill the other may not have. Accounting is a major area of importance with Partnerships. Tax liabilities are split between both parties as well as profits. Record keeping becomes crucial when 2 parties are involved.

Investing with a partner can be a smart move but make sure you pick your partner wisely.