Why Joint Ventures Are Appealing To Newcomers And Career Investors
A joint venture is when multiple parties invest in a real estate project to share the asset as well balance out the cost. These are popular as they mitigate the risk for those who have difficulty affording a property or if a collective wants to own a large cash-flowing property. Purchasing a commercial property is not uncommon, while buying residential is also favoured.
The important thing to note in any real estate transaction is that it’s best to take action whenever you’re ready. Opportunities will always arise for those looking to purchase real estate wherever you are looking, especially if you have the benefit of the assistance of multiple parties. Prices will only go up, sooner is always better if you are able to. Take advantage of the market, there is so much potential but nothing is built from hesitation.
When it comes to joint ventures it’s vital to draft a strategy and an agreement for the property, if you wish to keep everyone involved happy and secure. People change their thoughts and positions over the years, and these agreements generally take multiple years. It’s best that every party signs an agreement to establish what each individual will be paying, as well as making it clear what the strategy (or exit strategy is) for the property. If you leave all of this up in the air, disagreements could potentially occur. Regardless of your relationship with the others in this transaction, always establish an exit strategy to maintain the original vision and not sour the relationship. Work through every scenario, have a plan if someone wants to pull out or passes away. Be completely transparent to eliminate any future issues. The end goal should always be made apparent before anyone signs anything. Get a lawyer involved to review it to make sure it’s ironclad and completely legal.
When it comes to joint ventures you can utilize the different skills or benefits of each individual for the betterment of the asset. If someone has more capital they can take the brunt of the cost, while if someone is better at reaching tenants they can proceed with that, while if someone is stronger at property management that can be their main focus. Not everyone has to put an equal amount of money, you can determine who provides what and who owns a percentage of the property. You should provide only what you’re comfortable with.
When delving into a joint venture, you want to work with like-minded people. If you don’t have similar goals this can create friction. It’s wise to revisit your plans every 5 years and see how the investment has grown. Everyone in the group might change their goals, (which is perfectly normal) and it may be wise to alter the agreement if everyone agrees that is for the best.