4 Most Popular Forms of Real Estate Partnerships

Whether you are developing a real estate project or making a real estate investment, there are a lot of factors you should consider before investing in real estate.

Real estate investing can be a rather scary venture starting alone, particularly when it involves a huge sum of money, so you need to map out a clear strategy to succeeding in the already saturated real estate market.

For this reason, investors prefer to form real estate partnerships. These partnerships create an avenue where people are given a chance to pool resources, skills and experience to complete a project rather than one person bearing all the liabilities and responsibilities.

With these partnerships, you will be able to spread risk, scale your business, increase cash flow, take on larger projects, and buy more investment properties. Below are the 4 most popular forms of real estate partnerships:

• Real Estate Investment Trust (REIT): A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. Modelled after mutual funds, REITs pool the capital of numerous investors.

REITs provide new or small investors with the chance to be involved in larger real estate projects. The idea with this form of partnership is that people are able to buy shares in a property or portfolio. Properties in a REIT portfolio may include apartment complexes, healthcare facilities, hotels, office buildings and retail centres

There are actually 3 distinct ways to organize a REIT:

1. Publicly Traded REITs: This is a form of REIT that is almost exactly like purchasing shares of corporations in the stock market. Individual investors buy and sell Shares of publicly-traded REITs, listed on a national securities exchange.
2. Public Non-traded REITs (PNLRs): These kinds of projects, on the other hand, aren’t traded on the national securities exchange. Owing to this, they are less liquid than publicly-traded REITs. Still, these aren’t subject to market fluctuations and tend to be much more stable
3. Private REITs: These kinds of properties don’t trade on national securities exchanges and are completely privately owned. They are where you can purchase stock in a real estate project. Many times it might be an investment in an apartment or complex. Once you have enough stock in the estate, you can take up residence.

• General Partnership: When it comes to general partnerships one needs to be extremely careful. It is absolutely pivotal to know and trust your partners. Generally, partners have unlimited liability which means personal assets are liable to the partnership’s obligations.

With general partnership structuring, you can decide the rules and control the mode of operation compared with a corporation. General partners are highly involved with the management of the business. While there is some risk that comes with this arrangement, there are also benefits.

General partnerships will consistently have two people or more. There ought to be a formal, written agreement between the entirety of the parties, and any partner can enter into contracts that will become the obligation of the entire group.

• Real Estate Limited Partnership (RELP): A real estate limited partnership (RELP) is a group of investors who pool their money to invest in property purchasing, development, or leasing. A RELP is a person who is only liable for his stake in the property.

Limited liability partnerships are a very safe way to work with other investors. As a limited partner, if your shares are small you won’t be involved with the management or decision making. It will require none of your time to interact with other partners. The limited partners are outside investors who provide financing in exchange for an investment return.

• Real Estate Syndicates: Real estate syndication is a way for investors to pool their financial and intellectual resources to invest in properties they otherwise couldn’t afford.

The basics of real estate syndication are similar to two people who own a business. One works as the manager and operator of the business. He is in charge of finding the right location, raising funds, and managing the day to day operations. The other is the group of investors. This group is responsible for financing the project and gets a return in the form of dividends until the investment matures.

In all, real estate partnerships would always provide you with a chance to get involved in the industry without breaking the bank. If you want to get started making real estate investments, it might be smart to look for partnership opportunities. Always speak to an expert before you get involved in anything.