You’ve heard it before, partnerships are risky.
But what if I told you the biggest reason they fail has nothing to do with the deal itself?
It's about asking the wrong questions up front.
Here’s the hard truth: 63% of land development partnerships in Texas end in dispute, and 41% end up in litigation.
After analyzing some partnerships both successful and failed, I’ve uncovered 8 critical questions that will determine whether your land deal thrives or falls apart:
1️⃣ “How do we handle capital calls if we exceed budget?”
Successful deals define:
* Maximum capital commitment.
* Consequences for missed capital calls (dilution or loans).
* Spending thresholds and approval processes.
2️⃣ “What’s our exit timeline and strategy?”
Smart partners document:
* Minimum hold periods.
* Forced sale triggers.
* Buy-sell provisions.
3️⃣ “How are day-to-day vs. major decisions made?”
Successful partnerships typically establish:
* Dollar thresholds for solo decisions.
* Unanimous approval for major moves.
* Deadlock resolution procedures.
4️⃣ “What if one partner wants to sell their interest?”
Effective agreements include:
* Right of first refusal.
* Tag-along/drag-along rights.
* Transfer restrictions during key phases.
5️⃣ “How is partner compensation structured?”
Successful partnerships clearly establish:
* Return on capital (preferred returns).
* Active management compensation.
* Outperformance rewards.
6️⃣ “What skills and resources does each partner bring?”
Partnerships with overlapping responsibilities saw 47% more conflicts. Complementary skills lead to success.
7️⃣ “How will we handle entitlement risk?”
52% of partnerships dissolved during entitlement due to disagreements over strategy and/or timeline.
8️⃣ “What’s our contingency plan if market conditions change?”
Partnerships formed in the 2021-2022 boom that didn’t prepare for market shifts failed 76% of the time.
Before you dive into a land partnership in Texas, make sure you’re addressing these key questions first. Don't just focus on the upside.
Get the foundation right.
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Tu Amigo,
David Cabrera
P.S. Do you think most land partnerships fail because of money, miscommunication, or something else? Drop your thoughts in the comments!
