With the rising inflation and falling U.S. dollar, property prices have escalated considerably in the last few years. This makes investing in real estate a much more expensive option. However, by making use of one of the oldest forms of doing business, partnerships, one can avail the benefits of real estate with far little cost to oneself.



When using a limited partnership in dealing with , you must ensure that the legalities are clearly outlined and along with the circumstances under which the partnership is applicable. If you fail to do so, you might put yourself as well as your personal assets at risk that is if you are the general partner.

This brings us to an important concept; each partnership will have general members as well as at least one limited member. While limited partners avoid risking their personal assets in case the investment fails, they also resign their right to participate in the management of the business. Contrarily, general partners are responsible for the day-to-day running of the business; however, they may be liable to meet the debts of the company with their personal assets if the company's assets are found to be insufficient.

This threat of such a situation arising might scare novice investors from getting into a partnership where they are the general partner. Irregardless of the risk, you should note that partnerships have a lot to offer, after all when has anybody achieved greatness without taking a few risks. So to see why partnerships can be very beneficial, consider the following hypothetical situation; you have established a limited partnership with two other people to make a $ 10,000 investment on a $ 100,000 property. Now, based on the specifications of the partnership agreement, you find that you only have to put down 30 percent of the down payment. This figure, i.e. $ 3,000, is only 3 percent of the total value of the property. Now consider the amount of profit you will make based on such a small investment.

Hence, you can see why partnerships are so popular in real estate, as well as in all walks of life. However, before you jump-the-gun and get into a partnership unprepared, there are a few things you must remember.

Firstly, under no circumstances should you start a partnership without a formal legal agreement in place. Even if you plan to partner with someone who is close to you, such as a family member or maybe an old high-school buddy, always, always draft a legal agreement. We already have too many cases of close-friends or family members fighting it out in court just because the business went sour and the proper legalities weren't in place. No investment is worth losing people you love, therefore be as efficient as possible when drafting the agreement.

If the agreement is drafted correctly, everybody will know what their role is. Nonetheless, it is advised that each and every partner know exactly what they're contributing and more importantly, what they're NOT contributing. Nothing screams inefficiency and trouble more than when a partner tries to do something which he is not supposed to do, thus causing confusion and at times even disruption.

Lastly, when choosing to partner with someone, be sure that they have the financial resources to cope if the investment fails. Under no circumstances should you partner with someone who is contributing money from the kid's college funds or out of their emergency fund. This will lead to nullifying perpetual worrying and will also ensure that partners don't get frustrated if the investment doesn't show a return immediately.

That said, you should now be well on your way to building a partnership once you've found a . Make sure all the points mentioned above have completely sunk in. No body can guarantee success, but if you follow the principles laid out in this article, you will at the least, be able to run a partnership effectively and efficiently.

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