Matthew Cullum Property Joint Venture Blog
Property Joint Ventures
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A joint venture provides more resources in terms of finances, labour, and products. Property developers may join a property joint venture for many reasons, including moving into new markets, business expansion, resources, and new ideas or products. The advantages of joint ventures are also enormous, ranging from a pool of expertise to the potential of high returns.
With the value one gets from a property joint venture, what factors should you consider when joining joint venture property? Read along to find out.
Since a joint venture involves the coming together of two or more entities, the entities involved must decide on the financial arrangement. The investors must determine whether they will contribute equal funding or the investment it will be different percentages. Also, decide whether the investment is a one-time or small investment over time.
If the project is a large scale development, the investors or property developers might settle for financing. If it’s a small project, then the parties can opt for bridging finance.
The project that developers undertake determines the financial arrangement; it could be a refurbishment, heavy renovation, or ground-up development. Whichever the case, the different financial options include bridging finance, auction finance, and commercial mortgage, among others. Register to Matthew Cullum property blog for more information on networking with other property professionals.
For a successful joint venture, the partners involved should have a certain level of trust. The trust between the partners plays a vital role when it comes to liability. Individuals brought together solely by a business might be more concerned about individual interest and limit the liability to the minimum. On the other hand, friends will be more than happy to share liability.
Rarely will one have a friend who doubles up as an investor; therefore, it is up to the parties involved to create a genuine relationship for the project’s sake.
Usually, the bigger the investment, the higher the risk; every stage of a property development project comes with considerable risk. Thus, in a joint venture, the partners should limit liabilities and have an exit strategy.
In joint ventures, tax implication is an important area to consider. The investors and other partners can seek the help of a professional to guide the parties accordingly. All the partners involved must understand their roles in relation to tax.
Project Management and Governance
A joint venture for property development projects entails a lot of moving parts. Therefore, it is essential to have a clear guideline on project management and governance.
In a joint venture structure, it is essential to have a consensus on who will manage the project on a daily basis. To what extent are the investors involved in project management? The partners should consider every aspect of the project.
Under some joint ventures, investors might want their details to remain private. For this reason, it is crucial to consider in advance if such an arrangement will be considered, or it will be a problem.
Depending on the type of your joint venture, you can sell the property as a company or a straight-up. This aspect is important because joint ventures are usually for specific projects and are dissolve once the project is complete.