Saturday, December 5, 2009
Apprentices and Partners Wanted!
Real Estate is not a passive investmentThere is no real passive investment scenario in the real estate business. Even loaning someone money, and just collecting the returns should involve some activity on the loaner's part- can he trust the borrower, has he analyzed the expected return and risk, what is the equity position, etc. Some investors like to work with a "silent partner"- the one who puts up collateral, and then backs off to let the borrower do all the work. In the end, they split the profits. This is not necessarily bad, but be careful to recognize that a danger of passive involvement is also loss of control, and if the one trusted to carry out the specifics is not skilled, knowledgeable, or trustworthy, the whole investment could backfire.It can be a very good partnership, however, especially for the new borrower who may not be able to qualify for a loan on their own. It is also a good way for a less experienced investor to learn by observing a more seasoned investor go through all the steps that took her years to learn. Possibly the most important benefit for the worker bee is it helps develop a credible track record. This will help her in marketing herself for deals down the road, and also in securing loans for future deals. Investors and venture capitalists are more inclined to fund a known commodity. Even small successful ventures build a reputation.So the important thing to remember is whether in the role of investor or rehabber doing the leg work, property rehab, and eventual sale/rental, to recognize that it is to everyone's benefit to be actively educating oneself, attending to specifics, and be involved as much as possible in the process. That said, I am always looking for apprentices, interested in learning more about investment and willing to offer either time or money to their investing apprenticeship. Please call me at 206-355-1706 to learn more.