Hi everyone,

We have been receiving a lot of questions and interest in JVs lately, so we thought we would touch on this and give you an insight into JVs, how they work and what they are. There is a bit to cover in this so we will cover it in the next few blogs. And remember, if you have a potential JV or if you are looking for one you should post a note in the forum and see what you can set up!
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Joint Ventures

What is a JV?
“A joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activity together.”

So when we talk about Join Ventures in Property development what we mean is organizing a partnership between two or more people (companies or trusts) where each person contributes to the completion of the deal. Examples of possible assets that people can contribute are;
- Money (or equity e.g. the land etc.)
- Experience (previous deals/ developments)
- Education (knowledge)
- Skills (ie. Building)
These are just a few examples, and remember every deal is different. While each person is contributing, each person will also get a share in the revenues, sometimes also expenses, and control of the property, what ever is agreed upon at the beginning of the deal. So when setting up a JV it is very important to specify very clearly what each person’s contribution is, and what each person will receive. This must be agreed upon, and put in writing before the deal is commenced. The agreement should be written up by a broker, preferably a mutual broker, who will also help in resolving any disputes should they arise during the development.

Reasons for setting up a JV
If you are looking into doing a deal, but are not able to complete it on your own for example; because you don’t have the finances you need. You may then look for someone that has the finances, but does not have the Experience or Education needed to conduct the deal on their own either. This would then allow you do conduct the deal using someone else’s money, however for this to be appealing for the other party, you may need to offer a percentage of the profit at the completion of the development.

The above example is very stock standard, however all JVs will follow this concept. So reasons for doing a JV would be to open up possibilities, and allow you to be a part of deals you normally wouldn’t be able to do on your own. Another example of a possible JV is below;

Say you are all set up to do a development; you have the land organized and financed. Plans have been done, however you do not have the cash flow to pay for the builder. An idea could be to offer the builder a JV, so rather than paying him a wage, he offers his skills and maybe even pays for materials, and you give him an agreed upon percent of the profit. The percentage he gets should not only cover his costs but ensue he gets a profit so to ensure he is happy with the deal
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Well that’s it for now, but we will have more for you soon,

Support.