Perhaps you’ve already been doing business with a real estate investing partner without the benefit of a contract. Perhaps you find it awkward to even suggest a contract when trust is part of your working relationship. Or maybe you don’t want to slow down a real estate investment project with a contract negotiation just when time is of the essence. 

So how do you broach the subject of signing a contract with your current or future real estate investing partner? 

• Perhaps the most compelling argument for a partnership contract: A partnership contract is a kind of insurance against business disaster.
  A contract could save all of the partners thousands, perhaps tens of thousands, of dollars by covering the “worst case scenario what-if’s”, as well as defining the most basic terms of the partnership. Read this list of partnership “what-if’s” in my blog post “What Could Go Wrong? Partnership Contracts – Why You Need One”. [LINK – week 1 in this group]
• What are some helpful tips to make negotiating a contract easier and faster?

• Start with a basic, well-thought-out contract.
  On top of the contract put a printout of the “what if?” post linked above. Suggested remarks: “I strongly believe this contract is in our mutual best interests to sign. It will protect both of us, and the partnership, if something unexpected happens. 
• Draft the contract with a minimum of detail and emphasize your mutual best interests.
  Let your partner(s) know how this contract takes care of them. Don’t itemize each partner’s tasks and responsibilities. Just outline the project, give the partnership start and end dates, the capital contributed by each and how the profits will be split, and emphasize the protection clauses. 
• Offer to negotiate for mutually favorable terms.
  Ask the other party “Is there anything you want to be sure we cover?”
• Maintain a collaborative attitude.
  Stay positive. Avoid an attitude that one party will come out more favorably than the other. This is a win-win process.
• Stick to an agreed contract negotiation timeframe!
  Cover sheet dates to review, respond and sign are critical to be sure a contract negotiation doesn’t become a project delay. Haven’t heard anything for a few days? Make a phone call to say “I just wanted to check to see if you had any questions for me.”

What if, in spite of your best intentions and efforts, your prospective partner refuses to sign a contract – any contract? They may give any number of reasons – they only work on handshake ethics; contracts don’t enforce good behavior; etc.

The most powerful contract negotiating tactic of all: Be ready to walk away. If a partner flatly refuses to work with you under a contract, it is time to find another partner.

The financial and personal risks of a partnership without a contract can far exceed the possible benefits. Protect your partner(s) and yourself, and have a basic boilerplate contract that is easy to implement for each new partnership.

Are you in a partnership, or want to join one, and wish you could get a partnership contract in place without too much trouble?

Request a FREE one-on-one Investor Aptitude Assessment with an experienced, real-world real estate investor.