It’s always good to look at decisions from all angles, like when you check out a hat. Something could be hiding on the back. However, just like buying or leasing a specific commercial property, you don’t want to get stuck in “analysis paralysis.”
Part II of my three-part blog series on CRE investing takes a look at the pros and cons of real estate partnerships.
1. Partnerships get your foot in the door! Beginning investors can learn about the process, build confidence, and pool their money for bigger deals––all while earning passive income. They are a great way to learn and earn as you scale up your capacity and financial situation.
2. Owning a share of multiple properties allows you to diversify your investment portfolio. Being a sole owner of one or two properties ties up your money and limits financial growth opportunities. Partnerships also allow you to go further with your money by being part of bigger and more complex deals.
3. The way a partnership agreement is structured could provide tax savings. Talk with a qualified tax advisor with commercial real estate experience to learn more.
4. On the other hand, partnerships could end up limiting the potential returns for a single investor because profits are shared with the other partners. You may even need to contribute more money if the investment isn’t doing as well as predicted.
5. If you don’t have the right partners, the investment could be more headache than payoff. It’s important that partners agree to investment goals and uphold the responsibilities aligned in the operating agreement. You don’t want conflicts that could lead a shaky investment.
In Part III, I’ll discuss the things you can do to be proactive about picking the right investment partner or partners. For me, the decision to take the partnership route was the right one. The pros far outweighed the cons.
If you have questions about how to get started investing in CRE, we’re here to help! Email our team at hello@cegspaces.com or call 612-788-1552 if you have any questions. You can find me at 612-428-3333 or jeff@cegspaces.com.
Jeff Salzbrun is the owner/broker of Commercial Equities Group (CEG). As a veteran-owned real estate brokerage, CEG has been involved in thousands of sale and lease transactions, ranging from single offices to 250,000+ square foot buildings. At CEG, we get your deal done. We know space, and we know the CRE business.
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