Real Estate Limited Partnership - The Best Way To Invest In Real
Estate
Auguest 4, 2004
By Richard Smith, LLB
People pooling their money in order to
invest in real estate is by no means a new concept;
indeed, prior to mortgage loans this was probably
the most common method people used in which to purchase
property.
However, with the advent of mortgage loans,
pooling resources has become less common.
This is not to say, however, that a real
estate limited partnership is not a good way to invest
in modern property, as you'll see, the benefits of
a partnership scheme may be just thing you need.
As their name suggests, real estate partnerships are
a collective scheme established in order to generate income from
existing property, or to help build new property. By pooling resources,
the partnership is better able to put a larger down payment on a
property, or to purchase the property outright. Having said this,
there are a number of questions that investors (partner) need to
ask themselves prior to cresting the partnership.
Real Estate Limited Partnership - Issues To Keep-in-mind
Obviously, the first question any investor should consider prior
to entering into a partnership arrangement in order to purchase
real estate is: "is this the best way for me to invest?".
In part, the answer to this question is going to depend on who your
other partners are. Also, due to the costs involved in establishing
the partnership, the next question you'll need to be asking is:
"will I be getting a good return on the investment?".
The answer to this question will largely depend on both the experience
of your other partners and the amount the partnership intends to
invest in real estate. Frankly, if the partnership does not intend
to invest in excess of $10 million, it becomes questionable whether
it is of benefit establishing a partnership - as it will probably
not be the best real estate investment vehicle you could use.
The flip-side to this, $10 million is a lot of money - not only
do you need to know what you're doing, but you also have to have
a good deal of trust. Trust which multiplies by the number of partners
you have and the allocation they (and you) have in the partnership.
Finally, you'll need to decide who'll act as the best choice for
managing partner - remembering the liability that such person will
have in the partnership - and how you agree to unwind the partnership
in the case of a disagreement.
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