Working in tandem with an investor or another business person in the real estate world is not uncommon. It is even encouraged as it can help everyone involved to improve their careers. By working together, two people can learn many skills from the other, and profit-sharing is also a bonus. If you wish to strengthen your partnership, you can do so by signing on a real estate partnership agreement.
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What is a Real Estate Partnership Agreement?
A real estate partnership agreement is a legally binding document that allows two or more individuals to run a real estate company. It specifies the partnership’s responsibilities, and just like contracts, it also protects everybody involved in the partnership. This ensures that everyone benefits in the partnership no matter what happens later on.
How to Draft a Real Estate Partnership Agreement
As mentioned in an article by Forbes, placing all of the responsibilities in writing shows professionalism. This is a crucial thing to take note of when drafting a real estate partnership agreement. If this is your first time in making this sort of agreement, check out these tips so you can get started.
1. State The Terms of Your Partnership
Like every standard agreement, write down the terms of your partnership. Enumerating each one’s roles in the partnership is the secret to a successful career in real estate. The functions should be both agreed upon by the two of you to make sure that you see eye to eye about the parts each one of you will play.
2. Specify Time Together
It would be best if you also made a thorough discussion of your work schedule in your agreement. This is important for both parties to agree on just how long their partnership will last and how much of their time they are going to invest in it for the duration. If there are plans for separation later down the line, be open about it and add that detail to the agreement.
3. Specify Ownership Terms
Another thing to specify in your agreement is the terms of ownership among partners. State in your form how much and what exactly do each of you get to own and keep during this partnership as well as after. This will help you secure your earnings fair and square at the end of the day. Look into a shareholder agreement, purchase agreement, and deed samples to figure out the terms of ownership between you.
4. Include Professional Details
Share the details of your business when you sign a partnership agreement. That way, you are officially considered co-owners of the company. For example, if you both seek to operate a real estate construction company, then add its name along with you and your partner’s signatures on the form. That way, you both are legally recognized as owners of that business.
FAQ’s
Why is it a good idea to have a business partner in real estate?
Forming a partnership with a fellow business person in real estate can help you manage your work in this industry. Real estate takes a lot of time and effort out of those who work there. Partnering up can help manage this issue quite well. There is also the bonus of being able to share each other’s knowledge.
What are some examples of a real estate partnership?
Some examples of a real estate partnership include a company partnership and a joint venture. A company partnership refers to two businesses being under a legal collaboration and helping each other thrive while considered as separate entities. A joint venture is when two firms merge to form one new company.
Who does ownership of property work in a partnership?
When it comes to partnership, they both considered “tenants in common’. They both have equal ownership to the rental property and are bound to do what they want to it as long as it serves the partnership.
The key reason why people commit to real estate partnerships is that it allows them to combine their resources with that of somebody else. It will enable them to divide their expenses with that person as well. If we look at it that way, partnerships are blameless. You have twice more of your original amount of capital and half of your expenses. And with a well written real estate partnership agreement thrown in it ensures that this will let everyone get what they want at the end of the day.
