Category: Joint Venture Partner

Getting joint venture partners is not an easy feat.  The more people you know the easier it is. And once you have some successful projects, somebody that can vouch for your honesty and your ability to deliver on time, it’s easier to get new ones.

There’s a big difference between a joint venture partner and a private lender.  Generally a joint venture partner is for one deal, and they are supplying the financing funds for the deal, and you are doing all the work.  Once you pay back the joint venture partner’s contribution, then you split the profits.

In real estate investing we use Partners a lot.

I’m going to discuss some common Partnerships.

• Wholesaling, we partnered with people that have cash buyers or have properties and they need either Properties or cash buyers. Will use a co-wholesaling contract which is a joint venture agreement.
• In large projects I have used joint ventures with people that have a good amount of money either in liquid savings or in retirement accounts.
  • As an example, let’s say we have a small apartment building that’s worth a million dollars if it’s fixed up but it’s in bad shape. It’s worth 1 million dollars but it is going to need $200,000 in work. I find a motivated seller where I can buy it for $400,000. So the total amount into the project to buy it and fix it is $400,000 plus $200,000 or $600,000.  I need $600,000 to buy it and fix it.
  • So I find a joint venture partner that will fund the whole thing and I will buy it fix it and resell it. We create a new LLC with a joint venture agreement/
  • After the work is completed, and we resell it, the joint venture partner receives all of the $600,000 that he had brought to the joint venture, and then let’s say the prophet after all sales cost is $300,000. The joint venture agreement will state who gets what of net profit.
  • But say the profit split was the 33 67 so I would receive 1/3 of the $300,000 or $100,000 for my time.  The joint venture funding partner would receive $200,000.

What is the joint venture Silent Partner loan?

This is where someone will fund the acquisition of a property and also fund the repair costs of the property and maybe even fund some marketing dollars for the property to resell it. They are what we call a silent funding partner.

We only use joint venture silent partners for larger projects. Joint venture Partners generally have incredible resources, especially cash positions or retirement fund positions.

Let’s say that you met someone at a REIA meeting and they didn’t want to learn real estate investing but they wanted to invest in a real estate deal. And let’s say that you didn’t have very much cash but you needed Capital to be able to put in all cash offers for transactions that you could add value to and resell.

Here’s some basic steps of a joint venture agreement,

1. Agree that you would do all the work.  You would find the project and present the opportunity to the joint venture partner.
2. Once you agree on the project, you would ask the joint venture partner to deposit earnest money into escrow, say 10% of the value of a project.  It is important to also look at the taxation for both parties.  It might be wise for the joint venture partner to use retirement funds for the project so that the taxation will be advantageous.
3. You would then sign a joint venture agreement that would describe the terms: generally you buy something, you fix it up, and you resell it, and from the proceeds of the sale you pay back the joint venture partner 100%, And then split the profits after that.  The split could be 50-50 or it could be 40-60 or it could be 33-67.
4. It is important have a lawyer involved to protect everybody’s interests.
5. It is customary to open up an LLC just for this project.