Joint venture partner terms

[George Frye]

I have built a relationship with several possible le joint venture partners. They will only be putting up down payment money. I will be handling managing all other incidental issues. 

What are fair yet attractive terms for my jv partners?

[Charles Dobens]

George, prepare for the divorce before you get married. The worst situations I have been involved with in real estate have been the result of a bad partnerships and bad partners. The first thing you must do is discuss the roles and responsibilities of each partner. Another topic of discussion is do all partners vest immediately or do they earn in over time? Another topic is who has control? Is everything decided upon 50/50? (Recipe for disaster and potential stalemate). There are so many things that must be understood before you get started.

The number one being - Do I really need a partner or can I just hire someone to perform these tasks? I am always amazed when someone says they plan on giving up equity to their attorney in lieu of their fee. HOARD YOUR EQUITY. Once it's gone, you can never get it back (exceptions to every rule).

I have several training modules where I discuss the mistakes I have made in my investment career with partners. Whenever any two clients of mine plan on forming a partnership, we have a tough love conversation where I paint a very realistic and sobering vision of what can go wrong.

Have you had that discussion yet?