How to do a JV (joint venture)

[Phil Deshay]

Question, how would i structure a 50/50 JV deal to build 2 new homes with a builder on property i already own? The home thats currently on the property will be turn down and that mortgage will be paid off.

[Cory J Thornton]

@Phil Deshay - I have only done one joint venture. A contractor and I partnered to take a home that was gutted by fire, and bring it back to life. This may not be helpful to your exact situation, but I'll share what I learned in the process and how we structured our agreement. 

1) The person I did a JV with was someone I have known for 15+ years and have an incredibly high trust relationship with. That relationship allowed us to give one another the benefit of the doubt when needed, and it dramatically reduced the risk of one partner trying to take advantage of the other.

2) We drafted a written agreement. In that agreement we detailed the equity split of the JV along with the roles of each member. We tried to settle which person was responsible for which function before we ever made an investment together. That agreement had a clear start and a clear finish defined and was used as a roadmap for how the investment would be handled.

3) Since I was partnering with a general contractor, we ran the project through their business to take advantage of the systems they already had in place, and then billed the project for any administrative burden we used at cost. 

4) Financially I gave my JV partner's business cash, structured as a loan, that represented my portion of the deal's equity. Repayment of that loan was outlined in the agreement where each of us would recoup our initial investment plus any profit distributed as a percentage of equity. In your case it sounds like you are holding the land, and will be putting that in the deal for a portion of equity in the project.

I am sure that there are probably streamlined ways to create a JV and manage everyone's risk, but the above is the rout I took and it worked out well. I think the biggest key to success was starting with someone I knew I could trust and building from there.

Best of luck on your investment!