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Joint Ventures: The important facts to consider?

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InvestJ | 12 Nov 2014, 11:05 AM Agree 0
What are important things to know when entering a JV deal? I have a friend who’s keen to invest too, but I don’t want us to fall out later on down the track and for everything to head south.
  • Julie | 13 Nov 2014, 03:56 PM Agree 0
    Money changes any relationship. Investing with friends and family often seems like a good idea - it's certainly easy at first, but if everything isn't clearly laid out up front the pitfalls are enormous. If this relationship is important to you, carefully consider whether you should invest together. If you really feel that you each bring different things of value to the table and are comfortable with everything that could go wrong, make sure roles and responsibilities are clearly covered. Wishing you much success.

  • More_Money | 06 Feb 2015, 05:30 PM Agree 0
    Just a thought - Family (Friend) and business DO NOT Mix.
  • Scott | 21 Feb 2015, 12:13 PM Agree 0
    I'm the money partner in a joint venture with a real estate investor.

    My thoughts are:

    1. Each of you should have separate legal representation. Have an iron clad JV agreement drawn up - get a new one for each property.

    2. Each of you should bring different skill sets to the table. A good partnership is where you complement each other. I have the ability to get financing while he has the ability to locate the deals, handle the renovations and manage the contractors. If we both had money and neither of us knew how to renovate, it would be a frustrating experience.

    3. My personal feeling is that if you are doing this for the first time, you should buy each other a copy of Don Campbell's Joint Venture Real Estate (I may have the title wrong but check at Chapters or the library) book and read it. Discuss it, mull it over, discuss it again, and then if you still want to do it, go for it. I would also suggest that you join a real estate investment club and perhaps hire an experienced real estate investor to mentor/coach you.

    4. The previous poster "More_Money" makes a valid point about family (friends) and business do not mix. Money changes the relationship and not necessarily for the better. That said, I do find family a valuable source of temporary funds because they don't run credit checks. It's less hassle to borrow $10,000 from family member(s) than to go to banks or credit unions and apply for mortgages or lines of credit.

    **For some really weird reason I cannot fathom (enlighten me please!!) all of the financial institutions keep asking to see my personal pay stubs and assuming that my minuscule salary is carrying a residential mortgage and two investment property mortgages. IT IS NOT. The rental properties more than pay their own way. Unfortunately this policy means my debt to income ratio is quite high when it comes to applying for lines of credit or mortgages.

    I can't remember if it was Julie Broad or Ian Szadzo but one or the other suggested having family/friends take out a Home Depot card, max it out and the investor would pay the interest for six months, a year and then return all the principal when the refinance of the property was done. This might be an approach you could try.
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