How to find the ideal real estate investment partner

For real estate investors keen on expanding their business and leveraging outside expertise, partnering with another investor can open up new opportunities. Each investor brings their own unique experiences and skill set, but it’s important to consider the pros and cons of developing a real estate partnership.

Let’s go over how to find real estate investors, the advantages and disadvantages of getting a real estate investing partner, where to find them and how to identify a good match.

What is a real estate investor?

A real estate investor is someone who purchases real estate for profit. A real estate agent or REALTOR® often partners with an investor to secure real estate investments or real estate deals.

The most obvious way to become a real estate investor is to buy rental property. But you can become a real estate investor in other ways, including investing in real estate stock or a real estate investment trust (REIT), participating in a real estate crowdfunding opportunity, renting out part of your home and building a spec home.

What are different types of real estate investors?

When searching for a real estate investor, it’s important to understand the differences between each type of investor so you can find the perfect fit. Each type has their own unique strategies, goals and risk tolerances. Here are some common types of real estate investors and a brief explanation of what they do:

• Private equity investors: Private equity investors are financial professionals or firms that invest capital directly into private companies. Capital is pooled from a diverse group of investors such as institutional investors and high-net-worth individuals. The investments often involve operational improvements and other value-addition strategies to enhance profitability.
• REIT investors: A real estate investment trust (REIT) is a company or financial entity that owns a diverse portfolio of real estate assets, which can include residential and commercial properties. This diversification helps individual investors to invest in real estate assets without having to directly own or manage properties, and they mitigate risk across different types of properties.
• Institutional investors: Institutional Investors are organizations that pool funds from various sources to invest large amounts into a variety of financial assets. They’re often referred to as “market makers” because they wield significant influence as shareholders in the economy and are privy to assets that private individuals typically don’t have access to.

Investors often adapt their approach over time, combining strategies or shifting based on market conditions, personal goals and risk tolerance. A diversified portfolio that spans different real estate sectors can help mitigate risks and optimize returns.

When should property investors consider getting a real estate investing partner?

A real estate partnership refers to an investment strategy where two or more investors purchase a single investment property. Partnerships can be active partnerships – where all parties take responsibility for equal day-to-day property management – or passive income partnerships, which raise capital from not-as-involved investors.

What are the advantages?

Let’s take a look at the benefits of investing in real estate with fellow investors. A real estate partnership:

• Offers a range of talent: Partners can bring various characteristics that add to the flavor of the business relationship. Maybe one partner brings considerable business savvy and an in-depth real estate background, and another brings creative marketing experience and ideas to the table. The more people in the mix, the more flavorful the talent – and the result can be a variety of ideas working in harmony.
• Divides up the workload: Maintaining all day-to-day operations might be difficult for one person, so dividing up the workload can ease their stress.
• Can combine resources: Having a partner can add considerable cash flow to a real estate partnership opportunity. It allows real estate investors to take on projects they wouldn’t normally be able to access individually.

What are the risks?

Consider these risks before choosing to dive into a real estate partnership:

• Work styles or opinions may differ: Inviting another person (or more than one person) into the fold can create personality or management-style conflicts.
• Partners may not contribute evenly to the workload: When one partner feels dissatisfied with the workload distribution, this can lead to complications. You can mitigate this risk by clarifying the partnership agreement from the beginning.
• Earnings will be divided: Splitting profits could undermine cash flow earnings between partners, particularly in a bad real estate environment or lackluster investment.

Where to find real estate investors for a partnership

You can find real estate investors for a partnership several ways: through bank financing, a real estate investment club, crowdfunding, your current personal or professional network and online resources such as social media. Let’s learn a little about each option.

Consider mortgage financing

A bank can support your investment goals and loan the money for a particular investment property. Real estate banks should offer a wide variety of financing options, including opportunities for multiple properties.

However, the riskier the transaction, the stricter banks and mortgage lenders will be about funding real estate property. A real estate investing partner can help mitigate that risk.

You might need to apply for mortgage loans to purchase properties or find other real estate investors to help you generate your startup funds.

Find a real estate investment club

Real estate investment clubs help you find a partner by networking with other investors in the real estate market. Pooling resources with others can encourage larger assets that may not be possible without a partnership.

Begin crowdfunding

Crowdfunding refers to pooling real estate investing capital from multiple investors using digital platforms such as crowdfunding websites to find investors. Crowdfunding is open to the public and calls for potential investors to finance a particular project as a group.

Target your network

You may not have to look far outside your community or other groups to which you belong to find the right partner. Consider family, friends or business associates – the people you know in your community. If you have a real estate agent, touch base to see if they keep a list of investors on file. Targeting and narrowing your network can help you find the right investors.

Find online resources

Online investment groups and communities like Meetup and BiggerPockets could help you find the right people for a partnership. However, it’s important to make sure you use a reputable website or look into the right memberships. In other words, don’t get trapped in a scam or other shady deal.

Use social media

Social media groups target real estate investors by facilitating partnerships. Some popular social media networks to use are Facebook and LinkedIn, especially if you build up your profile around your real estate business acumen.

The bottom line: Find real estate investors through community groups and referrals

Finding real estate investors and deciding whether it makes sense to partner with them to raise capital can be a tough decision.

Whether you’re a beginner or you’ve been flipping houses for years, it’s important to find a fellow real estate investor who balances your strengths and weaknesses.

You also should partner with someone you can trust, whether that individual comes from your personal network, a real estate investment club that you belong to, social media, other online resources or your own real estate agent.

If you’re serious about real estate investing – but aren’t yet sold on partnering with an investor – you still need to start somewhere. Purchasing an investment property generally begins in the same place as any home buying journey – with a preapproval. Partner with Rocket Mortgage® and start your approval process today.