Property Joint Venture (Property Investment JV)




And so to the property joint venture... Picture the scene... You’ve sourced the deal of your life.  The seller needs to sell quickly and you have secured an earth-shattering discount on the price.  So far, so good...

But you don’t have any liquid cash!

What do you do?  Do you walk away?  Do you pass the deal on to another investor for a small sourcing fee?

Not after you read this you don’t!

Unlimited potential

The property joint venture (JV) strategy essentially gives you access to potentially unlimited funds without needing to fill in endless bank forms or supplicate to some smarmy bank manager in a suit.

The world is in financial turmoil.  Institutions don’t want to lend to each other, they don’t even want to lend to whole countries.  They certainly don’t want to lend to me... in fact I have just had the lending on two of my buy-to-let properties completely withdrawn by one bank, but that is a rant for another day ;-)

Property Joint Venture

BUT WAIT... While all this chaos is going on around us, remember that interest rates are at historically record lows.  What does this mean?  Big opportunities for you as a property investor, that’s what!

Why?  Because the high net worth individuals out there are getting a pittance of a return on their cash in a bank and are desperate to find better returns elsewhere.

Cash savers are actually experiencing zero or even negative net growth on their investments just now -- bank rate (0-3.5%) minus inflation (3-4%) can give as little as -0.5% net growth.

And it’s not just the high net worth individuals.  There are people in good jobs... accountants, doctors, business people, who are seeing their pensions fading away to nothing due to government cutbacks and the nose-diving stock markets.

They need another solution.

That’s where YOU come in.

What’s a JV?

In its loosest sense, a JV is an arrangement between two parties that will benefit both parties because each party brings to the table something that the other lacks.

The most common type of JV in property is where, one party brings their time and skills to the table and the other brings cash.

Location is another reason you may consider a JV.  I often get approached by investors outwith my area.  They will generally have secured a deal near me and are looking for my local input in finding a buyer for it.

So what you’re essentially doing is brokering property deals.  The investor makes the kind of return they’re not getting in the bank and you get a cut of it.  Everyone’s a winner!

Ways to structure

There are many ways to structure a JV.  It really comes down to what your partner is looking for in the arrangement and what you agree between you.  Here are some possibilities:

  • profit share -- when the property is remortgaged or sold then a % of the profit goes to each partner
  • equity share -- this method is common if the strategy is buy and hold
  • roll up the interest -- and pay it out when the deal is sold / refinanced
  • cash flow -- give your partner a share of the monthly cash flow
  • monthly interest -- pay your partner a monthly interest rate 
  • one off fee -- appropriate where your partner is not making an investment of money but instead maybe expertise or the ability to get a mortgage (as a mortgage “host”)
  • some other combination of the above.

As you progress, you will grow in confidence and where you perhaps started off giving a 50/50 profit share to JV partners, you may decide to alter this proportion or that you will only give a flat fee of a few thousand going forward.  Use your judgement as to whether this is appropriate.

To be continued ...

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