Nothing will be more educational than forming informal partnerships – and nothing will probably be more dangerous to your career, your finances, and your mental and emotional well-being.
First, there are a myriad of regulations with which to comply – both State and Federal. And you can become personally liable for failing to understand and follow any one of them.
Second, most of the folks you consider to be potential investors aren’t – not in the opinion of the regulators and not in my opinon either. They don’t meet the financial requirements (either for the regs or for your projects) and they don’t have the (much) needed level of sophistication (please don’t confuse this with intelligence).
Third, adding novices to the investment mix is a bit like throwing gasoline on a fire. You won’t want to be anywhere near them when they (or you ) blow up. And believe me, once you take their money, you may as well light the match.
Here’s the point: There are better ways to raise money – use them. Simple as that.
And here’s somthing else you may want to think about – in most cases, more money isn’t the answer; finding more good solid deals is.
Everyone thinks they can put more money to good use while the fact is that few can. Yeah, you can probably use more cash to carve out a better deal (for yourself) and to make some deals a bit more secure (for yourself), but money isn’t going to change a bad deal into a good one (or more likely, a mediocre deal into a good one).
We all believed once – in the idea that our friends (or family) could help us with some (extra?) cash and we could help them invest better. Sadly, it rarely works out that way.
What really happens is that we end up depending on cash flow from people (investors) who don’t really have any risk capital to spare. Yes, they may have a good job and they may even have a bit of money left over after they pay their bills at the end of the month, but that doesn’t qualify them as investors.
They won’t understand when you call and say that you need (even) more money because the roof is leaking, or a disgruntled tenant is suing you, or because the lender called your loan.
You won’t understand when they can’t deliver the money they promised you because their child is sick, or they forgot about an old IRS bill, or they want a new car. At this point, choose an excuse you like.
Get the picture?
Any chain is only as strong as its weakest link. You have to decide whether you are actually strengthening your business (chain) by using other people’s money, time and trust.
It most cases, you aren’t.