Silent real estate partners or investors are individuals with a lot of money but not a lot of time. Sometimes referred to as "sleeping partners," these individual investors provide the capital needed to invest in the real estate asset but do not participate in the daily management of the commercial property. Generally, silent partners lack the leadership skills, industry expertise or time required to run commercial properties such as restaurants, hotels or apartment complexes. However, as full shareholders, silent partners share in any profits, losses and tax responsibilities that result from operating the property.
Seek out real estate deals through word-of-mouth and networking. Many people who lack the capital to buy investment property post notices for silent partners on business forums and websites. In other cases, a family member or friend may need investment funds to start a new restaurant or purchase a rental building.
Choose your property manager wisely. Make sure the person who will be managing the building has the required skills and expertise to ensure that your venture will be profitable. Investing with someone who is trustworthy is essential and often leads to a successful partnership.
Make sure the terms of the agreement and business partnership are put into writing. If possible, hire an attorney to put together the contract and any related investment documents to guard against future pitfalls or setbacks. As a silent partner, you are equally susceptible to penalties and lawsuits if things go awry.
Join a real estate organization for individual investors. Seek out networking opportunities and resources to enhance your knowledge of real estate so you are more confident when investing in your next commercial property. These organizations can provide investor resources and educational programs if you need guidance or assistance (See Resources).
Research the investment thoroughly to judge whether the rate of return is worth the amount of money you are putting up for the property.
Be cautious about entering partnerships with close family members or friends. Draw up a contract with them just as you would with any other investment partner.
- "Ernst & Young's Personal Financial Planning Guide"; Robert Garner, Robert Coplan, Barbara Raasch and Charles Ratner; 1995
- Compliance Week
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