Tips Before Partnering or JV on a Property Deal

Tips Before Partnering or JV on a Property Deal

We have been doing property JV deals since 1994. Local knowledge is paramount. More than that, is honesty and integrity of your JV partners. A JV deal is like a marriage. Many property investors will choose to utilise a partner for a variety of reasons; some reasons are valid, others less so. Remember that every partner you bring into a deal will likely reduce your potential profit. While it is better to have a small piece of the pie versus no pie at all, perhaps there is a way to safely keep the entire pie for yourself. As much as we JV with local property investors, we are looking for much larger investors to grow a larger portfolio for all partners….Our HMOs are extremely profitable and looking for deep pockets in order to grow the portfolio. We have approached our accountants and solicitors to see if they high net worth clients who might want to see and hear about our HMOS.

In order for a successful JV on property or even HMOs…

Gain clarity before going into the partnership.

Know exactly the roles and time constraints of both parties. The converse of JV is simply

• Capital: Instead of partnering and splitting a percentage of your profits, consider borrowing money from a friend, family member, IRA, private money lender, or hard money lender. Borrowing money from a public or private lender may seem a bit more time-consuming to find and organise; however, you will likely keep a significantly higher portion of your profits.

Talk is cheap and so much is BS. Especially in the property world, there are many people who tend to over-promise and under-deliver. This is not a trait you want in any partner you work with. Start small and build mutual trust.  Ideally aim to know somebody for a few months, look over their deals, and have multiple interactions with them (and other investors they know) to properly vet any potential partner before working together one-on-one. It may be a prudent idea to:

• Walk through any deals your prospective partner may be working on currently.
• Make sure there are no current warrants or legal suits against your prospective partner.
• Inspect his or her books/files to see how organized your prospective partner is when it comes to incoming/outgoing payments.
• Ask for referrals of other investors who have partnered with or lent money from/to your prospective partner.

Have a solid agreement in place. We have from one of the top lawyers office in Manchester a JV agreement. This JV agreement stipulates all responsibilities….However the paper is only worth as the people who sign it.

If you are the person contributing the majority of money  or all the money in the transaction, make sure you feel 100 percent confident that your money is protected and accounted for. Aim to work with a partner you can describe as a hard-working investor who is experienced, tenacious, accountable, and ethical. What we offer to investors is that the property is in their name. They own the property and control it.

In conclusion, always aim to have clarity with regard to your entire situation. Aim to think long-term about what is best for both you and your potential partners’ businesses, reputations, and future dealings together. Sometimes the best deal is the one not taken. Look to build long term business relationships. There are groups of property investors who have hundreds of Professional & Student HMOs. It boils down to management of the HMO property….integrity & problem solving of all JV partners.