If you’re looking for faster returns from property investment or wanting to get into property investment when you think you don’t have the means, then you should consider joint venture property investment. Here is a quick guide on how to go about it.
Typically, residential property investment involves individual investors buying a property, holding it for several years to wait for the market price to increase and then selling it to earn from the capital gain (growth in the value of the property). So, if you could either speed up this capital gain or make it larger than your return on investment will be greater.
How to you increase capital gain? By adding to the value of the property, which means either renovating or doing a knock-down rebuild. By rebuilding with two or more townhouses or a luxury property offers strong potential for good returns.
This means moving your focus from a passive “sit and wait” investment to a more active small development focus. You might think this is out of your reach but by joint venturing with others who have the expertise and the funds you can be in the game of getting faster and greater returns. Or if you are someone with limited financial resources to do property investing on your own then you might be able to get into the market when you previously thought you had no chance.
Property joint ventures, whether between individuals, companies, or other entities, offer a unique avenue for pooling resources, sharing risks, and harnessing collective expertise to achieve remarkable real estate successes. But you need to attract the right partners, and you need to lay the foundations for the partnership is to be successful.
Reasons to consider a joint venture for property development
Have the land, but not the capital
For or those who own a block of land but lack the necessary financial resources to develop it, forming a joint venture can be an ideal solution. By partnering with individuals or entities that possess the expertise and capital required for construction, they can unlock the latent potential of their property.
Have the capital, but not the land
Conversely, there are those who aspire to invest in real estate but lack the appropriate site or property to begin. In such cases, joining a real estate joint venture can be a strategic move. Collaborating with others who have access to promising real estate opportunities allows them to enter the market and benefit from the investment potential without the need for an initial property acquisition.
Downsizing without moving
Joint ventures are also an attractive proposition for those looking to downsize but don’t want to move. A possibility in this case would be to join forces with other investors to knock down the existing house and build in its place two or three townhouses. The owners would then live in one of the townhouses and the other two would be sold or rented out by the joint venture partner/s.
Want to invest in a luxury house for greater capital appreciation
Luxury builds earn greater capital appreciation – and faster – than more modest builds. But, obviously, you need more capital for the initial investment. Joint ventures are a great way to access the luxury property market for individuals who may not have the means to do so on their own.
6 ways to find your Developer with best profit share
- What are your criteria? The first step in a joint venture is figuring out what you are looking for in an investment partner. What are you looking to achieve? Who is best positioned to help you do that? Do you need somebody more experienced than you? Somebody with different skills? Capital? Industry connections? Defining your criteria now makes your search for joint venture partners much easier.
- Talk to friends and family. Ask your inner circle to spread your idea around to their inner circles. This is a great way of widening your network quickly and effectively and – you never know – the best partner for you might be only two degrees away.
- Talk to Edina Building Group. At Edina Building Group we have a network of people interested in joint venture projects which we build, such as small-scale townhouse developments and luxury house. The combination of our expertise and our JV partner network can provide you with an easy pathway into JV investing.
- Make use of social media. The online world has forums and communities for just about every niche, and real estate joint ventures are no exception. Find joint venture groups and sign up. These are great places where you can ask questions and find other individuals who are like-minded and might make great partners for you. Don’t be afraid to talk about your aims and your joint venture plans (scope, property type, etc…). Sometimes, being direct is the best tactic.
- Property development networking event. Attend real estate networking events, seminars, conferences and meetups in your area. These gatherings are often filled with individuals and organisations looking for joint venture opportunities. As you can tell from what we’re recommending, networking can be one of the most fruitful ways to find partners.
- Talk to real estate buyers advocates and your trusted property developers. In the world of real estate, local agents are the unsung heroes, armed with an insider’s knowledge of the neighbourhood and a Rolodex of potential partners for joint ventures. They’re the matchmakers of the property investment world, helping you find the perfect collaborator to fit your investment game plan. And as if that’s not enough, these real estate pros can also serve as your legal guides, steering you through the complexities of joint venture agreements.
How to lay the foundations for a successful JV partnership
It’s important that joint venture partnerships get off on the right foot, and a lot of that comes down to good planning, transparent communication and a thorough understanding or roles and responsibilities. Here are the steps we’d recommend when beginning a JV partnership:
- Identify Potential Partners: Seek out partners who share your vision, objectives and principles. Evaluate their experience, knowledge and financial capacity.
- Clarify the Joint Venture’s Scope: Define the venture’s goals, scope, and timeframe explicitly. Specify the real estate properties or projects you intend to pursue.
- Establish the Legal Framework: Determine the legal structure for the joint venture. Collaborate with a real estate attorney to ensure compliance with state and federal regulations.
- Allocate Roles and Responsibilities: Distribute roles and responsibilities among partners according to their expertise, resources and interests. Set up transparent communication channels and decision-making protocols.
- Craft the Financing Strategy: Develop a financing plan for the joint venture, encompassing each partner’s capital contributions, the debt-to-equity ratio and the distribution of profits and losses.
Draw on our experience of joint ventures in real estate
Many of our builds at Edina have been completed under joint ventures, and we’ve seen the real advantages these arrangements can provide. We have access to a network of people who would be interested in a JV in real estate. If you’re thinking about undertaking such a venture, we can help you find like-minded potential partners – or, in some cases, we would consider partnering with you ourselves.
Don’t hesitate to draw on Edina’s experience of property development and profit share scheme.