Real Estate Investing Partnerships – Why They Fail and How You Can Succeed!

December 16, 2014

Real Estate Investing Partnerships – Why They Fail & How You Can Succeed!

Lately, I’ve been involved in a lot of one-on-one mentoring with several of my more seasoned students. I was approached recently by one of my students. He was inquiring about his partnering with a friend in business. It reminded me of business partnerships that I’ve had in the past. After our discussion, I thought that it would be a great idea to compose a multi-part series on business partnerships. It includes why they often fail and personal examples in my professional past.

There are basically two types of partnerships – new and established.

Why do people form partnerships? Well, in my opinion, one of the reasons is because real estate can be a very lonely business. Most people cannot appreciate how much work real estate investing involves. Therefore, they don’t appreciate what you do for a living. Real estate investing can be scary. It can be overwhelming and this is why we form partnerships. So we have someone to ride along with us in our journey.

It’s impossible to “know the unknown.” (unless you’re Donald Rumsfeld!) When you’re first starting out, you don’t know the process. But if you have a partner, you can lean on each other, which can remove a lot of the negative feeling associated with the “unknown.” New companies might think that having a partner equates to less risk and better profit. It feels like a partner helps mitigate the high start-up costs.

I found myself in a slightly different situation. When I decided to partner-up, my business was already established. I had bought hundreds of houses and had flipped 50-60 homes already. But I wanted to go to the next level so I brought on a partner in an attempt to increase the bottom line. Partnering in business is sometimes referred to as the “golden handcuffs”.

With this impending series dealing with partnerships, I don’t just want to discuss the struggles and failures of partnerships; I will also be talking about small business in-general. More specifically, I want to talk about those employees that can make or break your company. If you hire the wrong people, those people have the ability to destroy both your business and you personally if things go sour.

Are your employees an asset to your company or are they more like gangrene?! In this series, I’ll elaborate on my personal experiences…obviously without naming names to protect the guilty! But I feel like there are many, many lessons that can be learned the easy way and that’s why I will be sharing my personal experiences with you.

I’ve been told that one of the reasons my students are fond of me is because I will always give them the truth. I talk about my failures just as much as I talk about my accomplishments. So, in this series, we’ll talk about: partnerships that have succeeded and why, partnerships that have failed and why, hiring family or friends, how to deal with employee’s spouses who are like “gangrene” to your company and cause unnecessary drama, behind the scenes “whisper campaigns,” and that’s just a start!

Rotten partnerships and gangrene employees become like a virus, especially in small business – one rotten apple can spoil the whole bunch. The next thing you know, gangrene employees begin to be convinced of their version of reality, regardless of the facts. These type of gangrene employees figure out the systems and loopholes and then they begin slacking and taking advantage of the system. This is much harder in larger corporations but in small companies one angry employee, or their angry venomous spouse, can tear down your company.

Before you know it, the gangrene plague has spread to all corners of your company. There is no cure for this! Ive had a handful of past employees sow so much discord that I literally had to let go of them and start over. Sometimes, this is your best option!

Look, no one company is perfect! So in this series, I want you to learn from my mistakes so that your company is successful, profitable, and stands the test of time!