Are you considering a joint venture with a developer?
Joint ventures can be a real game-changer, offering great returns and exciting opportunities. But, hey, let’s not ignore the risks that can turn this experience into a painful one.
Joint ventures work like this: the developer brings the sweat equity, and you bring the funds. The profit split? Well, it’s either 50-50 or 60-40, depending on what you and the developer decide.
Now, let’s dig DEEPER.
As a JV partner, YOU become AN INVESTOR who gets a fixed return on your money and manages the project from a project management perspective. On the other hand, THE DEVELOPER TAKES CHARGE of running the project and acquiring the site. The JV partnership can take different forms, such as a loan agreement or sitting in the trust, depending on the project’s circumstances.
It’s essential to do your due diligence on the developer. Trust us. You don’t want to be in a project where everything goes south.
Having some knowledge and asking questions is crucial, even if you’re not a developer by trade. Don’t hesitate to pick up that phone and do first-level due diligence. And remember, the building part is the easy bit; finding the right site, dealing with councils, and making sure everything aligns—that’s where the real risk lies.
JV agreements should be expansive, extensive, and well-thought-through. Don’t rely on handshakes and good faith; ensure everything is properly documented and legally binding. We’ve heard horror stories of shady deals and even Ponzi schemes. So, covering all worst-case scenarios and protecting your interests is crucial.
Remember to evaluate the developer’s commitment. How much “skin in the game” do they have? Do they have a vested interest in the project’s success? These are crucial factors to consider. And remember the relationship with the builder. The right builder can make or break a project, so choose wisely.
So, grab your headphones, hit that play button, and join our hosts, Moxin Reza and Cheryl Leong, in this newest podcast episode for some eye-opening discussions and exciting stories. We promise you won’t regret it!
- 00:00 Welcome to Helpmebuy Property Podcast
- 01:35 How Does the JV Partnership Work?
- 03:56 Is It More of a Loan or Development Agreement With the Developer?
- 09:30 Perks of Teaming Up With an Experienced Developer and the Downsides Too
- 12:05 Spotting Red Flags When Investing in Real Estate
- 16:53 What if a Project Doesn’t Get the Green Light? What Happens?
- 19:17 It’s Not All About the Percentage of Returns When Deciding to Invest in a Project
- 21:04 The Nitty-gritty of Legal Agreements and Important Considerations When Crafting a JV Agreement
- 26:21 Why Must You Be Aware That Loan Sharks Have Zero Intention of Finishing the Project?
- 29:30 Let’s Explore Other Crucial Factors to Consider When Evaluating the Developer