3 Questions for Selecting the Right Business Partner
In my conversation with Jason Balin, who is a private moneylender that has financed over 1000 real estate investment deals, he outlined a sticky situation he had when he unintentionally partnered with the wrong operator for a project that involved the purchasing of a high number of properties. The project was ultimately salvaged, but was not as profitable as it could have been if he had performed his due diligence and partnered with the correct investor. However, Jason learned from this sticky situation and provided advice on, moving forward, 3 questions he answers in order to make sure that he selects the right real estate investing business partner.
Jason believes that it is extremely important to interview all potential business partners. The main outcomes of the interview process are three-fold.
- What are their goals?
First, you want to make sure that their real estate goals align with your own. In Jason’s sticky situation, he neglected to determine his partner’s goals before agreeing to do large deal together. It wasn’t until the deal began going downhill that Jason realized that they weren’t on the same page. For Jason, when he invests in real estate, he measures his success based off of how much profit he gains. He understands the importance of improving neighborhoods and making a nice product for a retail buyer or tenant; however, there is only so much of that you can do before you are no longer profitable. On the other hand, his business partner measured success by how hard he worked and how many hours he had put in. Therefore, the lesson Jason learned is that, on the front end, you need to ask questions like what are you goals? and where do you see yourself in 5 years? In doing so, you will know, without a doubt, whether or not their goals are aligned with your own up-front, so that you won’t have to come to the realization that they don’t align in the middle of a deal!
- What are the roles?
Secondly, if you have a specific deal, when you are seeking a partner, make sure you ask, “What do you think your roles will be and what do you think my roles will be?” One of the main reasons why partnerships, and the subsequent deals, fail is because clearly defined roles and expectations were not set in stone before agreeing to go into business together. Therefore, Jason advises that you not only have an operating agreement created and signed, but also take the time to sit down with your partner and go over, in extreme detail, the responsibly, roles, and expectations for each member in the deal.
- Can you get along?
Finally, make sure that you get a feel for whether or not you can actually get along with this potential partner. Just because someone brings more money or experience to the table doesn’t automatically qualify them to be your partner. If you can’t get along, no amount of money or experience can save you from failure. You are going to be in constant communication with this person, and any level of tension will end in disaster. Find a partner that you can be your truest self with and your will be setting yourself up for success!
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.