Consider All the Issues if You’re Starting a Real Estate Partnership

Regardless of the market or the economy, real estate is usually a sound investment. So much so, that many people have made it their business–specifically in doing things like buying and selling homes, or renting out properties and similar ventures.

But real estate also takes time and money, which is why many people who go into business involving real estate, do it with someone else–specifically, often, as partners.

But with so much money at stake, and so much money that can be made and lost, it is inevitable that real estate partnerships go sour.

The Business Plan and Details

The first hurdle to overcome is how you will make money in real estate. This seems easy, but saying something like “we’re going to buy property and rent it out,” isn’t enough. Many people in real estate based partnerships leave out important details.

For example, when it comes to rentals, who will be maintaining the property? Who is responsible for getting a plumber to the property at 3am when there’s an emergency? Will you use an outside management company or manage it yourself? And of course–who will pay the expenses, during the periods when the property is not rented out?

Dispute Resolution

How will you resolve disputes? In real estate, there can be many, seemingly trivial, but still important disagreements.

If the tenant needs his or her air conditioning fixed, if you and your partner disagree on what needs to be done or what contractor to use, you need to decide quickly–that tenant is sitting there without air conditioning while partners are arguing over the cost of an air coil and who will pay for it

Of course, larger issues must be resolved as well. Will you sell the property, and if so, when? If you’re flipping or selling, what will be your asking price?

In-Kind Contributions

It often happens in real estate, that one person has the money and the other has the skills or know-how to contribute to the success of the partnership. Often, the partnership is based on the non-monetary partner contributing in-kind services. But that can be tricky; money is tangible and can be counted, in-kind services are less obvious and have a less definitive value.

How will those services be valued? What happens if the services aren’t to the other partner’s satisfaction?

Construction Related Issues

If you are doing any construction, as is often the case with property that is being fixed up in order to inevitably be sold, you now have a lot of serious, construction-based legal issues to handle, including unexpected costs, unexpected delays, change orders, cost overruns and who will bear the costs of these things.

Issues as to which contractors will be used for construction are important as well. If one of your partners is actually doing the construction itself, liability issues if the construction is faulty, should be addressed before commencing work.

All of this can be resolved in a solid partnership agreement–but it should be one specifically tailored to real estate to fit your specific needs.

Call our Fort Lauderdale business litigation attorneys at Sweeney Law P.A. at 954-440-3993 for help with legal issues related to your partnership.