As a speaker and educator to various real estate investment groups across Canada and in the numerous workshops that I have conducted, the term "joint-venture partner" is probably the most overused and misused term tossed around today.
It would not be an exaggeration to say that over 90% of the individuals and couples that I meet and consult with have no alternative other than using JV partners if they truly hope to accomplish their goals. I am not being cynical or negative-I am simply stating a fact.
Personally, I have no problem with using JV partners. In my investment career, I have been on both sides of the fence-both a money partner and a deal finder.
I believe that learning how to create, attract and develop a proper JV partnership can indeed be the secret gem to creating real estate success. If you learn how to do it properly, it truly can provide you with the keys to the proverbial vault. I have witnessed this personally and professionally many, many times.
Having said that, I also believe that far too many people are walking around seminars and workshops today throwing out the term "joint venture" as if it were a simple magic bullet that will solve all your real estate needs.
"Don't have any money?" Don't worry, use a JV partner. "Can't qualify for a mortgage?" Don't worry, use a JV partner. "Don't know how to buy real estate?" Don't worry use a JV partner...
The result: too many novice investors are running around under the false belief that this is a simple, magical solution to all their woes.
The majority of investors, however, conceptually understand the need to use JV partners, but no one has ever actually sat down to show them how and, therefore, their real estate dreams and goals have been put on hold as they sit in the realm of analysis paralysis-not sure how to do it, deathly afraid to and, in the end, totally inactive.
The average investor will spend their money and focus on how much they are making in the process. Then, when their proverbial car runs out of gas, they start worrying about how to deal with finding a JV partner.
They typically have not prepared themselves, or their portfolios, to properly attract JV partners. Their car is empty so now they begin to look for a gas station.
The first step in being successful at attracting JV Capital is to shift the focus from them to you. If you currently have money to invest in a few properties but not quite enough to purchase the amount you will need to accomplish your goals, then you will likely be looking to joint-venture capital as your solution.
If this is the case, then the way in which you spend your money and how you develop as a person will be the biggest factor in determining your future success in attracting JV Capital.
I suspect that everyone reading this right now has a relatively good idea as to how much money you have available that you are willing and able to invest in real estate today.
This could be cash in the bank, money from other investments that you are willing to liquidate, or equity in one or more properties that you can access. I like to refer to these funds as your 'Seed Capital' - the money you have available to you to start your real estate investment business.
What if, instead of focusing only on what kind of real estate you are going to buy over the next 18 months, you shifted your focus to thinking about what a potential JV partner would want to see in you?
What if you projected yourself 18 months into the future and asked yourself the following question: Who would I need to be in order for someone to believe enough in me to trust me with their money? Are you that person today? Is there anything you need to change in order to become that person?
What if, in the process of spending your seed capital, instead of concentrating on what you are buying, you focus on becoming the person you need to be in order to attract JV capital in the future?
It is important to understand that you don't need to be that person today-you need to become that person.
When you start thinking this way, it will change the role and purpose of your seed capital. Seed capital is now no longer simply cash for a down payment.
It's the tuition fee that allows you to develop into a sophisticated real estate investor who is well positioned to be able to attract JV capital in the future. In order to understand this, they, and you, need to learn about CCI-Confidence, Credibility and Integrity. To learn the secret of successfully attracting joint-venture partners, download a copy of our March 2011 issue.
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I would like to preface a discussion about JV partners by sharing some of my personal observations over the years.