Anyone done a Joint Venture before?

Question

Has anyone out there ever done a joint venture with a company before? Curious as to how the experience went and how it worked out for you.

Jeffrey S. Breglio · Answer

Here's copy and paste that I often send to people considering doing deals out of state. It's doubly true for partnering situations.

Nearly every "really bad" deal that comes across my desk stems from investing out of state. Seriously! As a lawyer, I'm only brought in on the bad deals. And there are good experiences, too. But it is a much more difficult process when you can't personally oversee your investments. I generally tend to advise away from doing so. But, I don't want to rain on your parade either. So here are just some tips.

Be very careful about partnering with someone there. This is where most investors get scammed. Because it's out of state, investors almost have to seek someone local to work with. Be careful and choose wisely.

Thoroughly vet any one  you do business with, just like your tenants--criminal, BK, credit reports! If you can make it out there, network in the REIAs and talk to others about potential partners.

Do a double blind comparison: Work two people at once and don't inform one about the other to get two different opinions on a particular deal. Like two agents, for example, to see if one is over inflating the numbers.

Don't jump into a big project or multiple projects. It's easier to walk away from one bad property than 10.

Have proper documentation for every transaction, every detail in writing. And make every transaction independent of the rest. The more you commingle with the partner, the more difficult any one issue is to prove, and get out of.

Hold partner accountable every day. If there is even an inch of impropriety, you can bet there will be more. And it will be much more difficult to extricate yourself.

Have an independent party on your side. A title co. RE agent or PM. Attorney. CPA. Bookkeeper. Someone that only works for you! Always demand ALL paperwork from every transaction from the closing company itself. Don't wait for the partner to send.

Pay an agent or someone to swing by house to check on it and to be your eyes.

And, and this is NOT a bad thing, don't trust anyone. It just means to take control of the situation.

I'm sure there are more tips. But happy investing!

Jeff

Kathy Stewart · Answer

A JV can be as simple as a one page document with simple language on what each party commits to do.

Percy N. · Answer

@Steve Snyder, I did my first deals via essential a JV to get experience.

The deal was I would provide capital for the purchase and partner (who was a contractor) would find the deal, do the work and sell or manage the property and we would split the profits 50-50%.

The deed was put in my LLC.

It worked out OK, but towards the end my partner wanted to cash out at a price that was lower than our agreed to sale price (not a great return on my capital but not bad for his cash in). I ended up buying him out at the price he wanted and sold it at a higher price a few months later.

Overall, it was good for the experience gained and certainly better making a small profit while learning rather than paying a "guru" for a course.

Would I do it over? Well, now that I have more experience, I would not do a 50-50 split. I would only do it it someone puts in more skin in the game or we agree on an equity split.

Elizabeth Nourse · Answer

@Steve Snyder

I know a handful of nice (and smart!) guys that do JVs in D.C.  Feel free to send me a message with what you're looking for and I'll let you know if I have a good contact that might be interested.

Gita Faust · Answer

We have JV Partners in our business as well with accountants, associations, groups, property managers, real estate investors, business and the list goes on.

It sure was a learning curve, but in our process we learned that one should make a list before speaking to someone. A clear picture of your need and want:

- what you want out of the deal

- what they are going to offer/perform

- what is the value and how much $$$ is going to exchange hands

Be very specific, write it down. Once we did that we were on a roll.

And the same concept applies to all business not just real estate. Wish you all the best.

Gita

Manolo D. · Answer

What are the details? Is he capable of building equity through rehab savings? What does he offer on the table?

Percy N. · Answer

@Steve Snyder, what role would you be playing in the JV?

How much risk are you taking?

You could start with a small deal or a small slice of a larger deal and see how it works.

You can find good people at your local REIA meetings.

Steve S. · Answer

@Perry Ivy @Percy N. I appreciate both your input ... thank you for your information. I have a deal in DC that is a great opportunity and I am just trying to make it work. A little leery on going in with a JV unless someone knew someone solid to work with.

Thanks for your input.

Anyone done a Joint Venture before?

Most Popular Reply