Whether you’re just starting your real estate investment career or you’ve hit a plateau in your growth, joint venture partnerships can be an awesome way to help you achieve your goals. A good joint venture partnership can help both of you increase capacity, while also allowing you to benefit from each other’s expertise. Whichever skillset you have, there is someone out there who needs it. Read on to see a few recommendations on what you should look out for in a joint venture partner.
Although we tend to be drawn towards individuals who are most similar to us, this is a case where you will want to partner with someone who has different strengths as well as different weaknesses than you. Most partnerships are made up of a working partner and a capital partner. The working partner generally finds the deal, gets it under contract and manages the property as an asset, ensuring that it’s operating at its highest and best use. This involves managing the renovations, the tenants and the strategy for that particular property. The money partner generally brings the downpayment and the closing costs to the deal and often the ability to carry a mortgage.
As stated, your jv partner should have skills and resources that complement yours. Evaluate their track record and how this could affect their ability to deliver on their part of the agreement.
The JV agreement
At some point in your relationship, a joint venture agreement will need to be signed. Never skip this step. You can find one on lawdepot or ask around; someone will be willing to share. It will need to include your profit sharing formula, each party’s contributions to the deal, who is responsible for what and any other clauses that you may consider important. You should not forget to include any conditions under which the partnership may be suspended or ultimately dissolved. It is recommended that you consult a real estate attorney at this stage.