Let's Talk Joint Venture Property Development

 Approach With Caution!

Partners in a  JOINT VENTURE property development must have a legal 
agreement before any work starts

From the desk of Colm Dillon 

Developer, Author, Property Development Coach

If you are new or even experienced in property development, do not to rush ahead on a hand shake and verbal agreement.  

This is a costly mistake. Don't do it!

Let's Talk for a while on Joint Ventures

The idea of a Joint Venture in Property Development attracts a lot of people.

I have only done one JV in my development career. It was successful. 

It was successful because a legal agreement came first before any work was done. 

The following steps should be followed in a joint venture property development and with no rushing by either partner.

 JV partners should be equal in "intent" and also in financial capacity.

There is no automatic correlation between money, intelligence and joint venture property development knowledge. 

You may have the property development knowledge and skills. 

Your partner has more money, then they will want more say in the development decision making on a day by day basis irrespective of no development knowledge. 

An old rule; 'He/She who has the Gold; Rules.

This applies in a joint venture in property development. If you have the property development knowledge and less money in the deal then the money person will want to tell you what to do.

That cannot happen or the development is in danger. It can mean legal action and lower profits as well as your mental stress.

So before any work starts in a  a JV, a legal agreement 'must' be in place . It set out each partners role in detail. 

I say again do not enter a JV unless the Agreement in signed or you legal rights are in danger.

All sorts of good reasons can delay the signing of the JV agreement. No reason is good enough - it must be signed or walk away from the deal.

But you should not start any development work. If you do, both you and the project are in danger. 

I get a lot of questions asking for advice about joint venture property development

especially from those with limited money and lots of knowledge.

In the first place let's understand 'why' you are thinking of entering into a

joint venture property development.

After all, in a joint venture you have to take into account another persons attitude, feelings, decision making process, (or inability to make a decision), whether they have a logical and sensible mind; the list goes on.

So, getting into joint venture property development must have a good 'payback' for you; actually, for both partners.

Whatever you lack is usually the reason for entering into a JV.

It would take me an age to cover all types of joint venture property development,

,so I will concentrate on the following situations

For example: The other party may have a wonderful property and wants to develop it, but does not have the knowledge.

You "love" the site and know that you could make it a very successful and profitable real estate development joint venture.

Another example: Maybe two individuals have saved their capital, however individually it is inadequate to undertake a project.

Combining their capital and borrowing capacity will allow the joint venture property development to proceed.

Irrespective of these examples, entering into a joint venture property development

 is ALWAYS second best, to doing a real estate development by yourself.

So you must be clear as to why you are doing real estate development joint venture, and it must be secured by a legally prepared and binding real estate development joint venture Agreement.

joint venture property development Agreement sets out what each party will contribute, both money and effort, and sets out each party’s obligations.

It also sets out what happens if the parties 'fall-out' with each other, as well as the division of profits or losses.

There is a lot more at stake if you joint venture with your brother-in-law, or other relatives. 'On-going-nightmare' is a phrase that comes to mind.

Oh yes, if a family joint venture property development brakes down, it doesn’t matter how many pages are in the Joint Venture Agreement, or what the words say to prove that you were "RIGHT," as far as YOUR brother-in-law is concerned, you are a 'expletive deleted.'

Just thought I'd get that one out of the way!!

One more thing ... doing a joint venture property development with a rich person, when you are many levels poorer, is also not smart.

Why? See Golden Rule above.

Also, if the rich guy tell you not to bother with a real estate development joint venture agreement. He/she appears to be saving you money on legal costs; tempting eh? 

What's  really going on is they are taking away your legal rights. Yep, you'll have less rights than an employee. If that's the deal it's better to be an employee!

I prefer to do a real estate development joint venture with people of equal power.

Notice I did not say of 'equal skills.'

Thank You,

Colm Dillon Signature