JV agreement

[Teri M.]

Can someone explain EXACTLY how a JV agreement works when partnering with other ppl in the biz and splitting profits?? Thanks in advance!

[Scott Hubbard]

Originally posted by Teri M.:

Can someone explain EXACTLY how a JV agreement works when partnering with other ppl in the biz and splitting profits?? Thanks in advance!

A JV agreement is usually a property specific or at least an agreement tied to specific assets. When the asset or property is dis-positioned (sold, surrendered, depleted, etc) the joint venture is terminated. Whereas a partnership (LLC, LP, GP) may be ongoing or perpetual.

JV agreements can be private or closely held usually not requiring public notice like LLC's and corps. Note: Some states do require them to be recorded. Becuase of this, JV's can be cheaper, in the long run since you may be able to avoid costly entity fees like in California.

I like JV's because they are great when your partnering with another investor or money partner for a single acquisition. If you know that your going to be moving into ongoing property acquisitions, then you may also consider an LLC or other partners

Here is a simplified sample of a JV agreement. http://www.biggerpockets.com/files/category/forms

Originally posted by Teri M.:

Thanks Chris! What im wondering is lets say another wholesaler has a deal and I have a buyer for it, would we make a Jv agreement agreeing to split profits? Does the jv give me right to market the property and give address out to my buyers? And from there do I just connect the two (wholesaler and buyer)?

Yes, you can partner with the wholesaler using a JV agreement, but only if the wholesaler has an equitable interest in the property. Effectively, the wholesaler or YOU would have to purchase the property first.

If he only has it under contract, then you will need to have a exclusive or limited marketing rights agreement. The wholesaler's contract with the seller must also afford the wholesaler assignment of the marketing rights to a third party (you).