The role of an agreement when starting an investment partnership

| Jul 5, 2023 | Commercial real estate

Investing in real estate can be a highly lucrative venture, all the more so when you go into business with a like-minded partner whose skills complement your own. As with any other type of business venture, though, it is crucial to have a thorough partnership agreement in writing when starting your real estate investment business.

Even if you are on the best of terms with your business partner at the outset, disputes and disagreements are sure to arise when money is on the line. You can keep your business running smoothly and preemptively resolve disputes by understanding the importance of a well-written partnership agreement.

Establishing boundaries between partners

One of the main purposes of a partnership agreement is to outline the rights and responsibilities of each partner. By doing so, there will be clear boundaries that each individual must respect. If one partner does overstep these boundaries and attempt to make decisions outside their authority, the agreement can serve as powerful evidence in a dispute case.

Providing a dispute resolution process

If a dispute does arise that you cannot resolve through simple conversation, then you should look to your partnership agreement for a mutually-agreeable resolution process. An ideal agreement will include terms for resolving a dispute which all parties involved will agree upon when signing the document. This might entail undergoing mediation or arbitration rather than resorting to a contentious courtroom battle.

The most promising results are only possible when two or more investors pool their resources, knowledge and skills together. Partnering up for business opens the door for disputes and abuses of authority, though, so it is essential to have a comprehensive partnership agreement in place.

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