Here’s What You Need to Know Before You Partner…Pros and Cons of Partnerships with BRRRR Investors

There are high hurdles that you’ll need to jump over to get started as a BRRRR investor. Two common hurdles that investors face are getting the funds to start and having the know-how to do it successfully. Once you have gotten started, your first project will generate funds for your second project. The more BRRRR projects you complete successfully, the easier the next projects will become. But… getting started is hard!

Partnerships and BRRRR Success

Something you can think about in your career as a BRRRR investor is whether you want to partner with others along the way. There are many kinds of partnerships in BRRRR projects – you need to find the right partner and the model that works for you and your partner. 

You might decide to work with a more passive partner that advises in the background or maybe only contributes funds. Alternatively, you might decide to partner with someone on a more active basis where you both put in the time and hard work. Some partnerships are limited to a single project, and others will last for a series of projects. 

However you decide to do things, here are some considerations for making partnerships an effective part of your BRRRR strategy.

The Pros of Partnerships

#1 Partners can contribute funds. One common reason that people decide to partner on BRRRR projects is to share the financial burden. With BRRRR projects, you need capital upfront to purchase the target property and fund the renovation costs. A partner that can contribute funds can be a big help. 

#2 Partners can contribute skills. As a newbie BRRRR investor, chances are that you’ll lack experience and know-how. Maybe you have a construction background, but you know nothing about buying, selling, and renting out properties. Maybe you’re a whiz at numbers and negotiating, but you’re a disaster with a hammer and a paintbrush. Very few of us are the full package, and partnering with someone whose skill set complements your own, is valuable. You can also learn a lot working with someone who knows things that you don’t.

#3 Partners can contribute time and effort. It’s also common when first starting, that investors are still holding down full-time jobs while trying to get those first few deals under the belt. Partnering with someone whose vision matches your own and who is willing to back that up with hard work can help share the load. 

The Cons of Partnerships

#1 Sharing is not all it’s cracked up to be. Despite the benefits of partnering, you will have to share the profits with your partner. On the one hand, getting started with a partner is better than not getting started at all. On the other hand, if you’re driven and ambitious it could be demotivating to only have half the profits at the end of the project. 

#2 Not all partnerships go smoothly. Whether you’re partnering with someone you don’t know very well or with a spouse, close friend, or family member, you never have a guarantee that things will be smooth sailing. One common cause of conflict is an imbalance of power, for example, when one party contributes all the money or all the skills. This can result in situations where someone gets bossy or feels their partner is not contributing enough. Strive for a partnership where both parties make valuable contributions.

Some Quick Tips for Making a Partnership Work

Have a partnership agreement. Particularly when it comes to money, mortgages, property, and profits, it is important to have a clear, written agreement for how these things will be managed.

Define clear roles and expectations. Whether you include these aspects in a formal partnership agreement or jot them down on a paper napkin in a bar, decide which specific roles and activities each partner will be responsible for. Also, talk about expectations relating to the project and your respective contributions. If you think working hard is putting in 40 hours a week on nights and weekends, it’s worth checking with your partner if they see it the same way. 

Communicate! No matter how water-tight that agreement is or how well you clarified roles and expectations, situations will come up that you hadn’t considered. Take the time to set ground rules for communication, such as regular check-ins to review progress against plans.

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