Inexperienced folks often think their best friends are the best candidates for investment partners. Frequently you see partnerships develop between friends at the golf course members of the same social club, between people who attend the same church or work together for the same employer. Let me assure you, it’s not nearly enough to guarantee a successful investment relationship.
The biggest mistake that cashless partners make trying to entice a partner with money is to oversell the deal! They often overstate the benefits the money partner is supposed to receive. If I were to show you all the proposals offered to me, and if we added up all the profits I’ve been promised I would need to rent the Bank of America headquarters building to store my money. One major problem with most small real estate investment partnerships is……… they are almost alway engineered by the broke partner! The typical arrangement is where one partner is asked to put up cash and the other is supposed to contribute equivalent personal services.
I don’t know how you think, but I’ll tell you this much about myself. I’m very skeptical about anyone who proposes a joint plan using my money, while risking only personal services themselves. My first question is aimed directly at the heart of the issue. If you’re so smart, and if your ideas are so good, then why is it I’ve got the money and you don’t? Unless the question gets answered to my total satisfaction, I will not consider, going forward. And neither should you!
Partnership investing can work very well when the partners are wise enough to assign separate duties and contribute on an equal basis.