What Is a Joint Venture Real Estate Investment?
A Joint Venture real estate investment is when 2 or more people or entities pool their resources together to purchase a piece of real estate.
One of the things you want to do when you start investing in real estate is you want to start looking for investors. And these investors you want to look at are going to become what’s called joint venture partners who are involved in a joint venture.
What Is A Joint Venture Partner?
A joint venture partner is someone that is part of the deal. They aren’t just writing you a check necessarily. Well, they might be, but they’re not a mortgage lender. They are not someone who is just lending you money, money that is expecting a specific payment on a regular basis.
A joint venture partner is somebody who is usually writing you a check and usually paying for a lot of the purchase, but not expecting a monthly payment.
For example, let’s say you are purchasing a property worth $400,000, and you need money to buy that property. And it costs $200,000 and you need another $100,000 for renovations.
What you do is you go out and you look for a joint venture partner or multiple joint venture partners.
I’ve had a couple of joint venture partners involved in a single deal and that’s okay too.
What Is a Joint Venture Agreement
A joint venture agreement is a document that specifies what each partner is responsible for in the joint venture and what each person is receiving in return for their participation in the joint venture.
You and your partners pull all your resources together and go out and buy a property. When you do that, you must sign a joint venture agreement.
In the joint venture agreement, you lay out what each person’s responsibility is as part of that agreement.
In the case of a money partner, which is a type of joint venture partner, they would be responsible for providing all the cash required in the transaction.
And the way you would write that up in the joint venture agreement, you would say they would be responsible for purchasing the property. That may be that they come up with all the cash, or maybe they go get a mortgage. It’s really up to them.
However, they know that they can purchase that property as well as provide any construction costs or any costs that are going to be required to carry the property for a set period of time. They are in the deal just like you are in the deal.
Your role in that joint venture partner would be documented in the joint venture agreement, might be that you are responsible for purchasing the property, acquiring the property, looking for properties, the ongoing management of the property, and be the general contractor of the fix and flip if that’s also what you’re doing.
You might also be responsible for collecting the rent if it’s a rental property; for paying all the different people that need payment; making sure that the mortgage payments are made; the taxes are paid; the insurance is paid; any ongoing maintenance is being handled; and if there is any monthly profit, that it’s distributed properly.
Summary
Everybody’s tasks as part of this joint venture have to be documented properly.
The joint venture agreement must be signed by each party. You can have several people involved in a joint venture. You can have many partners … you can be the deal maker for example or whatever you want to call the activity that you are performing as part of this joint venture.
