“The biggest risk in real estate isn’t the market, it’s picking the wrong role for your personality.”

Retoro Capital Investments

Uncover your real estate blind spot now

Introduction: Find Out Before You Make a Costly Mistake

It's easy to find real estate partnerships, but the real question is, do you really want to? When it comes to real estate investing, you have several options for ownership, ranging from doing everything on your own to teaming up with others who do everything for you. The key is to understand your own personality, financial situations, and the pros and cons of each approach before diving in.

Section 1: 3 Different Ways to Own and Operate Real Estate (Plus a Secret Option)

There are only 3 basic ways to structure real estate ownership with a "secret" option #4. There's no one right answer, but there are a lot of questions to ask. Ask yourself if you have more time, money, or experience, and that will guide how and how much you'll be hands on or off.

1. By Yourself, No Partners

Owning real estate on your own means you control everything, from management to decision-making. It also means all the risks are on your shoulders. No partners to answer to, but no partners to help out either. Despite rental income being taxes as unearned or "passive", running a real estate business on your own without partners is far from passive income.

Solo: Go it alone for more income, control, and responsibility

2. Managing or General Partner (GP)

As a GP, you’re actively involved in managing the deal. You have a say in the big decisions and control over the investment, but you also take on a significant amount of risk and responsibility. With your other general partners, you'll be "asset managers" together. That means managing the property manager. With contractors, the old saying is, "You can get good, fast, and cheap: pick 2!" and for property managers it's, "You can get accounting, lease up, or construction: pick 2 and good luck!" Whichever one they fall down on is your new asset manager job!

GP: Manage your managers (and partners)

3. Limited Passive "Silent" Partner

Limited partners provide capital but don’t manage the day-to-day operations. This is a more hands-off approach, allowing you to invest without getting involved in the nitty-gritty. As an LP, you'll still need to learn 101 and 102 as IF you were going to buy the asset yourself so your due diligence can be thorough. Learn to read the pro forma financials and assess the likelihood of the business plan succeeding.

LP: Review the deal monthly or quarterly and let the partners work for you

4. Secret Recipe

I combine all 3 of these options for a diversified portfolio not only with a variety of different properties, types, locations, and managers, but also diversifying my time from active to passive investing. There's no need to choose! Become an expert in what you manage actively, and leave the passive investing with experts in other areas. For private lending notes, I have partners who manage most of that day to day or origination and servicing. I manage my small rentals solo, and my large commercial with partners.

Hybrid: A little of each goes a long way

Section 2: Why (and Why Not) to Be a General Partner

Before jumping into the world of general partnerships, it’s crucial to understand both the benefits and the risks. Taking on a management role increases your risk exposure, so make sure you know why you want those shares before you pursue them.

Pros of Becoming a GP

• Involved in Decision-Making: As a GP, you’re directly involved in making decisions that protect the capital you’ve invested.

• Gain Management Experience: Being a GP allows you to build your management experience in real estate, especially if you want to expand into different sectors or larger deals.

• Enhance Deal Performance: If you already have experience, you can play an active role in enhancing the performance of the deal and get paid for your time investment as well as your financial investment.

Cons of Becoming a GP

• Increased Legal Exposure: GPs are more exposed to legal risks, such as lawsuits. Unlike limited partners, GPs can be held liable for issues related to the deal.

• Regulatory Risk: As a GP, you also take on regulatory risks. If there’s even a hint that capital was raised incorrectly, you’ll need a securities attorney to represent you.

• GP Capital Calls: GPs often face capital calls, where management is required to inject additional funds into the deal before asking limited partners to contribute.

• Hard Work: Make no mistake—being a GP is hard work. This isn’t the role for someone who wants to sit back and watch the deal unfold.

Solo landlords get into trouble here from a few sources. Landlords thinking their monthly expenses are their only expenses rather than budgeting for long-term capital expenditures for items that need attention every 5-20 years such as roofs. Another pitfall is thinking a property manager knows more than you and will manage it better, but the owner still needs to oversee more details than they might originally realize.

Section 3: Use Your Capital to Attract Great Partners and Great Deals

People with ready cash to invest often ask how to get involved on the General Partner/management side, but before jumping into that role, there are some important considerations for how much cash to invest in one deal and what type of role to fulfill.

• $500K to $1M to Invest in One Deal? If you have this amount ready to go, lead with that in potential joint venture conversations! Your capital gives you significant leverage to negotiate management shares or a lead position in a deal. One great place to find deal joint ventures open to cash-heavy partners is through our free weekly investing club. [Insert link to club here.]

• $10K to $300K to Invest in One Deal? If you’re working with a smaller amount, you can still get involved. Join a group that pools resources to invest together. Our investing club, for example, facilitates members to pool funds and collectively negotiate for GP or JV equity in a deal.

• High Net Worth Individuals at $2.5M+ If you have a high net worth, you can leverage your balance sheet to sign on loans. Lenders often require a rescue partner, and high-net-worth individuals can fill that role, helping a deal close when financing gets tight.

• Relevant Skills and Experience Beyond capital, having highly relevant skills—like construction, finance, or property management—can add significant value to a deal. If you bring these skills to the table, you can negotiate a role as a GP even without huge amounts of capital.

Section 4: Should You Really Be a GP? When LP Might Be a Better Fit

If you’re excited about the idea of being a GP, there are excellent opportunities to be a GP if you’re ready for the ride. We take on JV partners in our fund at Retoro Capital Investments as well as limited partners, and we can talk about how we can make that happen with our fund. However, if the thought of the legal risks, capital calls, and hard work doesn’t sit right with you, you might be better suited as a limited partner where you can invest passively, earn strong returns, and let the management team do the heavy lifting. For example, in our fund, limited partners can earn 10-12% returns on private loans with zero ongoing work after completing their due diligence on us.

Personally, we own several rental units on our own as a couple with no other partners, we are lead sponsors on some deals, minor partners on others, as well as limited partners especially when our experience in a particular asset type isn't helpful.

Final Thoughts: Which Path Is Right for You?

Whether you decide to be a GP or LP depends on your goals, risk tolerance, and how hands-on you want to be. If you’re looking for active involvement and the potential for higher returns in exchange for more work, GP shares might be the right move for you. But if you prefer a more hands-off approach, being a limited partner can offer a lot of benefits with fewer risks. There's no need to choose all of one or the other: diversification leads us to consider combining the ownership methods of solo, active partner, and passive partner depending on our ability to contribute funds and effort.

Ready to get started? Check out our investor portal to see the deals that WE are investing in for early retirement: .

There's a Test at the End!

Quiz Time: Boss, Bank, or Backseat?

• Ready to run the show solo or with partners exchanging more work and risk for more control? (Boss)

• Just want to fund it and relax? (Bank)

• Eyeing a bit of both depending on the deal? (Backseat)

Are you a Boss, Bank, or Backseat investor? Let me know in the comments, and let's talk about how to get you on the right path.

Ready to get started?

🔗 Log in to our Accredited Investor Portal to invest together on what we are using for our own passive early retirement. Invest passively to live actively!