Joint Ventures 101
joint ven·ture
ˌjoint ˈvenCHər/Submit
noun
plural noun: joint ventures
a commercial enterprise undertaken jointly by two or more parties that otherwise retain their distinct identities.
When it comes to investing your money and making your money work for you, there’s the big three investments: RRSPs, TFSAs, and Mutual Funds. Those are what the big brokers and banks sell you. Is there anything else out there that can be invested in for the short term other than stocks? What about more options? What about short-term investments? Long-term with good returns and stability? Most people say real estate is the way to go, but many people have only a few of the needed tools, knowledge, experience, and accessibility (money/contacts (team) to invest. . . That’s where joint ventures come in.
Why is it beneficial to the investor?
Real estate can be hard to break into. It requires insider knowledge, connections, cash down, and equity to have a successful deal. Joint ventures bring the expertise of a real estate developer, or a working partner, who has the access and the experience to get the deals on real estate that allows for money to be made by the parties involved. These are deals that the average person doesn’t have access to or don’t have the knowledge to find.
The real estate developer also brings a level of expertise, knowledge, negotiation skills, and a list of reliable contractors that you either don’t have or don’t have time to put to use. The working partner (real estate developer) is experienced and skilled specifically in these areas and should be an expert/insider in their chosen market to get the best deal for everyone involved.
Investing in a joint venture deal allows you to enter the real estate world and reduce your learning curve. It gives you the chance to make money without having to learn everything there is to know about real estate, and without swinging a hammer or screening a potential tenant. It reduces your risk and increases your leverage by working in one of two ways:
either working with multiple partners and money to eliminate the need for a bank
or by taking your money as a down payment and leveraging with conventional lenders
Why is it beneficial to the real estate developer?
The real estate developer (working partner) has the knowledge, expertise, negotiation skill, and contractors; almost everything to bring together a great real estate deal and make money. So why do they need to bring in partners? Partners in a joint venture agreement bring something to the table that the real estate developer needs to do multiple deals and purchase homes faster than the banks can fund.
Joint ventures work on a mutually beneficial system that works, and a symbiotic relationship between working partner and money partner that allows for everyone to bring something to the table and benefit. Whether you bring money, skills, knowledge, equity, or capital, you’re providing something that benefits the working partner to allow a deal to be produced from beginning to end.
When a money partner enters a joint venture with a working partner or real estate developer, they increase their leverage as well as yours.
People always ask me if I renovate houses, and the truth is, that is just what we do. Why we do it is to create amazing relationships that, when put to work in real estate, have the ability to create value for everyone involved. This is only the beginning when it comes to joint ventures. There is so much more to be said and to cover to get the full scope of what a joint venture is and how it works, and I’ll be covering each topic in greater detail in future posts.