How to Work with JV Partners for Your Real Estate Deals
Working with JV partners is to a relationship. You need to know how to develop this JV relationship and grow it. Basically I like working with JV partners I like and feel they bring value to the table. Integrity is a MUST! Too many times people see the short picture, not the long picture. Was rather disappointed from 2 groups of people I worked with this past week. Forward and onward however.
Finding and developing good JV partnership relationships is not about beating your chest and discussing how many deals and how much money you have made. Experience is extremely important, however with your JV partners you need to know what they are looking for and how you can fulfill their needs. Ask them in so many words what they are looking for….what has been their experience… Gd gave you 2 ears and one mouth.
Take into consideration their age. If they are young they might be more aggressive. If they are older they probably want to have a lower risk and consistent returns.
When working with JV partners they can supply you funds and you pay a rate of return for example 8-10% per year. To protect them, have them place a first charge on the property. This ensures them to some degree. Only seek to buy BMV deals. Prices can fall as much as they rise, but buying BMV provides cushion.
Another way to proceed is have them do an equity split. They own the property in their name…they get 50% of the profits.
These are questions you need to understand in advance from your JV investors, what are they seeking and how best you can serve them.
You need to know what are their expectations. We prefer to under promise and over perform. All the time this is not possible but we are upfront about all and all the risks. There is no free lunch in real estate. There are always surprises in the refurb process among st other surprises.
Regarding expectations…Ask the following
- Expectations of communication
- Level of involvement
- How soon do they want their money back
- Are they an accredited investor
- What is their expectation for return
- What are their risk tolerances
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