Partners must clearly understand their roles and responsibilities when entering a real estate partnership. It can avoid issues down the road. At an affordable housing workshop, panelists discussed the importance of vetting development partners. One way to do this is through an unbiased self-evaluation.
Identify Your Roles
Building a multifamily development project requires more than the developer’s unique skills and expertise. It also demands a team of partners to support the Angelo Ingrassia developer during the development process and ensure the project’s success. Before entering into a partnership, it’s essential to determine your role and the roles your partner will inherently fill. It will reduce confusion about expectations and help mitigate conflict that could derail the partnership. Identify the assets, capabilities, networks, and skills that your prospective partner brings to the table. It will allow you to co-design a concept and map the activities needed for success. A real estate lawyer is critical for establishing the legal structure for the project, navigating zoning and land use regulations, and reviewing purchase contracts with contractors and potential tenants. They can also be valuable in assessing whether your partnership concept makes financial sense and addressing any potential issues.
Identify Your Partner’s Roles
For a partnership to succeed, each partner must pull their weight. One of the best ways to ensure this is to identify each partner’s roles, which will help keep everyone accountable and focused on completing the development. To do this, partners should take the time to review their own goals and determine what their strengths and weaknesses are. From there, they should look at their prospective partners’ goals and try to match them up as much as possible. It is also essential that both parties discuss what could go wrong and develop contingency plans. It may include sharing losses, what would happen if one party wanted to leave the partnership and more. The final project should then be reviewed by a lawyer and drafted into a contract. It will help ensure all critical components are in place should any challenges arise.
Draft A Contract
Clear roles, expectations, and communication are essential to a successful partnership. The next step is to draft a contract that defines each partner’s responsibilities and allocates profit and loss. A well-written agreement will ensure that you are protected should something go awry. The contract should begin with an overview to provide context for the sections that follow you move forward; this will set the tone for a transparent and honest relationship. It’s important to avoid using complex legal jargon; it’s best to use language understandable by all parties involved. Including a section on handling disputes is also a good idea, as it will prevent unnecessary resentment and conflict. Additionally, it’s a good idea to address what happens in an “event of force majeure, a clause that provides an exception for unexpected events. This way, both parties can agree on a course of action to overcome such hurdles together.
Establish Clear Expectations
If you’re partnering with someone else to develop an apartment building, you must establish clear expectations about the roles you both will play. There should be no discrepancies over which of you will manage the finances, for instance. It will prevent any potential issues down the road, including miscommunication and conflicting goals. You should also ensure that your potential partner’s long-term aspirations align with yours. Otherwise, you might work towards different ends, jeopardizing the entire project. Finally, you should have the necessary documentation for your potential partners, such as a feasibility study and market analysis. It will help you show that your project is sound and a good investment for them to take on. You can get the help of a real estate attorney to help you put this together, but you must communicate your expectations clearly and use language everyone understands.