How to Create Passive Income with Joint Ventures in Commercial Property

Investing in commercial property can be very rewarding and is one of the best ways for investors to create high yield "passive income". In fact, it is one of the most lucrative forms of real estate investment.

And the type of commercial property investment with the best combination of passive income, return on investment and investment security is: investing as a "silent partner" in commercial property joint ventures.

Want to earn more and work less?  Keep reading...


What is a Joint Venture? (aka "JV")

A joint venture is a contractual business association of two or more parties engaged in a common commercial enterprise. (e.g. Commercial property joint ventures.)

Joint ventures are among the most powerful tools available for shaping success in today's competitive business environment. Individuals or companies enter joint ventures in order to share strengths and resources, minimize risks, and increase competitive advantages in the marketplace.

Joint ventures can take the form of new business entities or collaborations between businesses. In a collaboration, for example, a commercial property developer may contract with a landowner; the former providing the know-how and the latter providing the resources for a new commercial property development.


Joint Ventures vs. Partnerships

Joint ventures are similar to business partnerships, with one key difference: partnerships typically involve ongoing, long-term business relationships, while  joint ventures are based on a single business transaction or investment such as the acquisition of a commercial property.


Joint Venture Agreements

Joint ventures are created by each of  the prospective members entering into a contract or agreement that defines their combined objectives and individual responsibilities. The joint venture agreement is important for avoiding trouble later.

Joint venture agreements define specific member rights and responsibilities. Each of the joint venture members has a right to participate in the management of the enterprise, to share in the profits, and the responsibility to share in any losses that the joint venture might incur. In addition, each member has a responsibility to act in good faith in all matters that concern the mutual interests of the joint venture.

Joint ventures can be terminated for several reasons :

• A date specified in the joint venture agreement.
• Completion of the joint venture's purpose.
• Death of an active member if so specified in the joint venture agreement.
• By court ruling related to member disagreements.

EXCEPTION: Silent Partners

An exception to the rules regarding joint venture agreements pertains to "silent partner" membership.

Silent partner definition:  A business partner who provides capital but does not actively participate in the management or operations.

As it pertains to joint ventures, a silent partner member is a joint venture member who contributes capital to the enterprise, shares in its profits and losses, but is not involved in its management or operations. Typically, a silent partner is an individual or business strictly interested in joint ventures as "leveraged income" passive investments (see below).

i.e. Silent partner investments are primarily intended to generate "passive income". (This is how I prefer to invest my money in commercial property investments.)


Passive Income

According to InvestorWords.com, passive income is defined as: "Income derived from real estate and business investments in which the individual is not actively involved, such as a limited partnership (or joint ventures)."

Essentially, passive income, is income that doesn't require your direct involvement. This fits perfectly with our description of silent partner membership in a joint ventures as discussed above. Other forms of passive income that you may be familiar with include: owning rental properties (if you have a property manager), royalties from an invention, multi-level marketing, etc. If you want to earn more and work less - passive income should be a focal point for you.

There are two basic forms of passive income:

1) Residual Income

Residual income is any payment system where you receive regular, ongoing payments as a result of a single sale, activity or investment -- with little or no further effort required once the initial sale, activity or investment has been made.

• Insurance agents who earn annual commissions when clients renew their policies.
• Internet marketers who sell their products directly from the websites they create.
• Recording artists who receive royalties for their music when it's played and sold.
• Multi-level marketers who earn $  when their direct customers reorder products every month.

2) Leveraged Income

Leveraged income is another form of passive income that leverages the efforts of other people and businesses to create income for you. Examples of leveraged income include:

• Silent partners in commercial property joint ventures (see above).
• General contractors who employ sub-contractors to do the work.
• Franchisers who sell their business models to franchisees.
• Multi-level marketers who develop downline organizations.
• Internet marketers who sell their products through affiliates online.

There are many different models for passive income in many different businesses. The key is that you are making money off of other people's labor, rather than your own.


Commercial Property Joint Venture Investment Opportunities

For information on passive income investment opportunities in commercial property joint ventures, click here.


AUTHOR'S BIO:

John Hanlin is an Independent Investment Consultant specializing in high yield, low risk investments secured by real estate and is a seasoned investor of over 25 years. John is the owner of the investors' website www.JohnHanlin.com & author of "The LazyMan's Guide to Understanding Foreclosures & REO Property Investment" (available at www.LazymanCompany.com)