From the course: Real Estate Deal Structuring: Introduction to the Waterfall Framework
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Risks of investing with others
From the course: Real Estate Deal Structuring: Introduction to the Waterfall Framework
Risks of investing with others
- So what's one of the biggest risks of investing with others? Well it's when you disagree with your investment partners after the fact. And disagreements can lead to some really nasty things like ruined relationships or even lawsuits. So what are the two things that lead to this nastiness when investing with others? Well there's two big mistakes that people make. One is not factoring in what the contributions each person is putting in above and beyond the money that they're investing. So if somebody's doing a lot more work, their work or their sweat equity should account for something extra. And the second mistake that people make is not to think about what would happen if the investment loses money. You see, if it makes money, the person who put in the work should get compensated for that. But if it loses money, maybe they should be punished for that as well. So by factoring in what people's contributions are, and what would happen if the investment made or lost money, you can avoid…
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