Real estate partnerships can be a great way to pool resources, expertise, and capital, but they can also be risky and complicated if not handled properly. I've been through several failed partnerships in the real estate business, and along the way, I learned some valuable lessons. If you're thinking about forming a partnership in real estate, here's my advice based on my own experiences, what went wrong and how you can avoid those pitfalls.

When the Money Comes In, Attitudes Change.

One of the most significant lessons I've learned is that everything seems to work well in a partnership, until the money starts flowing in. When that happens, people's attitudes can change quickly. Greed, jealousy, and independence often emerge once the business starts generating income. This shift can lead to conflicts, mistrust, and even the collapse of what initially seemed like a promising partnership.

In my past experiences, I found that partners who are easy to work with before the money cames in often became uncontrollable and difficult once profits are involved. They will suddenly develop new ideas about how the funds should be distributed or start demanding more for working harder than everyone else.

If you're considering a real estate partnership, it's important to have clear expectations and agreements on how profits will be shared and how the money will be managed. Having these conversations early on can prevent misunderstandings later.

When the Business Revolves Around One Person.

In one of my failed partnerships, I gave it my all, but it ultimately didn't work out because the entire operation depended on me. I provided the office space, specialized licenses, software, and experience. Rather than feeling like equal partners, my colleagues felt there was too much risk in one party contributing more assets to the business than everyone else. This imbalance made them uncomfortable, even though my intention was simply to supply the business with whatever it needed to succeed.

This kind of imbalance can create tension in any partnership. In real estate, where specialized knowledge and resources can make or break deals, it's essential that everyone brings something valuable to the table. Make sure roles are well-defined, and everyone feels empowered in their contributions. This ensures that no single partner becomes the focal point of the business, which can lead to resentment.

Consultations Instead of Partnerships.

If you've had bad luck with partnerships like I have, I recommend exploring consultations instead. Rather than forming formal partnerships, you can consult with other real estate professionals who have expertise in areas where you may be lacking. This way, you get the advice and support you need without the complexities of a formal partnership.

For example, you might hire a real estate lawyer to guide you through legal matters or bring in a consultant to advise on property valuations. This approach allows you to cover your knowledge gaps without being tied to the responsibilities and risks of a partnership.

Share Percentages: The Source of Many Disputes.

One of the trickiest parts of forming a partnership in real estate is deciding on share percentages. If these shares aren't based on clear, objective criteria, like financial contributions or specific expertise, it can lead to significant problems down the road.

I've seen firsthand how shares allocated without a solid basis can create tension. Partners who contribute more over time will feel slighted if they receive fewer shares, while others who hold larger shares but don't work as hard may create frustration among the team.

Also, never give shares based on future promises. In one of my partnerships, a member was given shares because he promised to secure funding for the business. But those of us with smaller shares ended up raising more money than he did. His shares were essentially wasted on an empty promise.

Discipline Among Equal Partners.

Another challenge I've faced in real estate partnerships is the lack of discipline, especially when partners consider themselves equals. This can create confusion and lead to a lack of accountability. In one of my partnerships, there were five of us involved in a real estate development projects. One partner was responsible for writing proposals, but whenever he missed deadlines and was confronted, his response was, "Kati mwagala kunkuba? Kale munkube," meaning, "Do you want to beat me up? Go ahead."

This kind of attitude is a sign of gross indiscipline and lack of respect among partners. In real estate, where timelines, proposals, and contracts are critical, you cannot afford such behavior. It's essential to ensure that everyone is held accountable, regardless of their position in the partnership.

The Need for Capital and Financial Partners.

In the real estate industry, large amounts of capital are often needed to get projects off the ground, so financial partnerships are sometimes inevitable. From my experience, these types of partnerships work best when the partners contribute funds and provide advice but don't get directly involved in the day-to-day operations of the business. This way, they can demand accountability and dividends without interfering with the management and daily operations of the business.

In cases where partners are too deeply involved, it can create power struggles and conflicts. By keeping the roles of financial partners limited to funding and strategic advice, you avoid many of the issues that can arise when everyone tries to manage the business.

Align Your Goals from the Start.

Before entering into a real estate partnership, it's critical to ensure that your goals align with those of your potential partners. Misaligned goals or differing visions for the business can quickly lead to disagreements, which slow down decision-making and hinder progress.

I recommend conducting interviews or discussions with potential partners early on. Talk about your long-term objectives, your expectations for the business, and how you plan to resolve conflicts if they arise. If your visions are not aligned, it's better to find out before signing any agreements.

Conclusion.

Real estate partnerships can be incredibly rewarding, but they require careful planning, clear communication, and mutual respect. From my own experience, I've learned that partnerships can fall apart when roles aren't clearly defined, shares aren't allocated fairly, and partners don't hold each other accountable.

Before diving into a partnership, take the time to assess whether you need one, or if you could achieve similar results through consultations or other forms of collaboration. And remember, the key to a successful real estate partnership lies in transparency, discipline, and shared goals.

By learning from my past mistakes, you can avoid the same pitfalls and build a real estate partnership that leads to long-term success.

 

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