Weighing the Pros and Cons of Purchasing Real Estate With a Business Partner

Are you debating whether to seize a great real estate opportunity by making a purchase with a business partner? Although working with a real estate partner can come with several advantages, from potentially lowering out-of-pocket costs to qualifying you for a pricier property, it can also come with a number of disadvantages, especially if you and your business partner don’t know each other well or aren’t skilled at keeping lines of communication open. As you weigh your options in making your next commercial real estate purchase, be sure to think through these pros and cons before going in with a partner.

Your Individual Out-of-Pocket Down Payment Will Likely Be Smaller

Perhaps one of the biggest benefits of purchasing real estate with a business partner is that your individual financial contribution will likely be lower than if you were to purchase the property alone. Depending on the deal you strike with your partner, you may even be able to put in half or less of a down payment! If you’re in a fairly tight financial situation but still want to seize a great opportunity, this could be an ideal arrangement.

You Might Qualify for a More Attractive or More Expensive Property

In some instances, lenders may be more likely to qualify two business partners for a large mortgage. This is because both you and your business partner would bear the responsibility of repayment, therefore reducing the lender’s risk. If you have your eye on an expensive property, going in with a partner might help you qualify!

Make Sure Your Partner Is Trustworthy and Easy To Communicate With

Above all, it’s critical to have a business partner whom you believe is trustworthy and with whom you can easily communicate. If your partner is constantly flaky, unavailable or not transparent about their side of any business deal, you may want to think twice about signing legal papers on a purchase alongside them. On the other hand, if you’ve been working with your business partner for some time, trustworthiness may not even be an issue!

Purchasing commercial real estate is already a major business decision, and deciding whether to go in with a business partner can make it even more complex. If you’re considering purchasing a property with a real estate partner, be sure to carefully review these pros and cons first. If you feel your partner is trustworthy and you believe the financial benefits of a partnership are worth the potential risks, buying real estate with a business partner could be the right decision for you.