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.