From the desk of Colm Dillon ...
Colm here ...
Here is a short video on a few things you should watch out for before entering into a Joint Venture:
The idea of a Joint Venture attracts a wide cross section of individuals.
I get a lot of questions asking for advice about a joint venture ... how to begin a real estate development joint venture ... especially with limited money and knowledge.
There are so many reasons for entering into a joint venture. If you are thinking of going down the 'Joint Venture" road, I have a few suggestions to make.
In the first place let's understand 'why' you are thinking of entering into a real estate development joint venture.
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 a real estate development joint venture must have a good 'payback' for you ... actually, for both parties.
Whatever you lack is usually the reason for entering into a JV.
It would take me an age to cover all types of real estate development joint venture, so I will concentrate on the following situation ...
If it does not fit you exactly, you should be able to read between the lines ... or write to me in the box below.
For example: The other party may have a wonderful property (site) 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 real estate development joint venture to proceed.
Irrespective, entering into a real estate development joint venture 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.
A Real Estate Development Joint Venture 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 ... the term 'on-going-nightmare' is a phrase that readily comes to mind.
Oh yes, if a familyreal estate development joint venture 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 real estate development joint venture with a rich person, when you are many levels poorer, is also not smart.
Well, in simple terms, when 'Push Comes To Shove' Money Rules ... you know the golden rule. He who has the GOLD, RULES.
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 he/she is really doing is taking away your legal rights. Yep, you'll have less rights than an employee. If that's the deal ... better to be an employee!
You see you have less money than him/her and no real estate development joint venture agreement to refer to your Rights.
I prefer to do a real estate development joint venture with people of equal power.
Notice I did not say of 'equal skills.'
Sources For Finding Real Estate Development Joint Venture Partners
Get to know the local real estate agents; I mean know them well. Remember what I say in the ebook.
Call in and buy them a cup of coffee, take them out of their work place; what about dinner after work; really spread yourself around.
Invest your Time in finding good, well informed, dedicated agents. Believe me they are in your business community ... it's your job to find them.
Appreciate that Agents are essentially self-employed, irrespective of whether they work in a Real Estate Agency ... their 'mind set' is independent.
They back themselves and their abilities to provide a sales service at a level that "consistently" provides them with a 'good income.'
That 'good income’ by the way, will leave most of their 'client's' income looking a little anaemic.
The 'good agents' are busy; their 'time' is money; literally. So don't mess them around.
Don't talk to them as though you are the Aga Kahn! You're Not.
Why am I making such a big point about agents.
I believe "people" get the agents "they deserve." Leave your ego at home.
To be a successful agent these days you have to be very good. Many are highly educated and choose real estate as a career for the freedom, individual reward and great returns.
OK, you've found a partner who has the land and you are comfortable with the relationship after several meetings.
Important question! What value does he put on the land that will be put into the JV?
Just throwing a few figures around to give you an example. Let's say that 'fair' market value for his land right now is $300,000.
He wants it put into the joint venture at $400,000. So if your real estate development joint venture agreement involves you gaining a share of the profit, your share will be $100,000 less.
Now let's say that part of your 'skills contribution' to the real estate development joint venture includes being responsible for rezoning the land to a higher level.
When you achieve that for the joint venture, that rezoning may take the land from a single unit (house) dwelling zone to a six dwelling unit zone.
Your efforts have increased the land value significantly ... no, not six times, as house properties are valued differently to multiple unit properties. But it may have increased by 3 or more times, depending on your market.
Once again the $100,000 will come off your share.
Now you may be prepared to accept that for the experience ... I just want you to recognise what the deal is.
What I have written above on a real estate development joint venture is always based on your knowledge.
Sometimes your knowledge is the main thing you have to contribute to the other party of the joint venture.
My ebook will teach you the full explanation of all the terms we use plus
. How to do a Feasibility Study ... . How to establish a development team of your own ... . Importantly, how they work together ... . How to get the best out of them ... . What your manner should be ... . How to go about selecting a builder ... . How to get a building price; the best way ... and so much more.
At the end I actually go through a 'step by step' residential real estate development project as though I was doing it myself.
If you have never applied for development finance before, I not only tell you how ... I also include a template of an application that you can use ... you can make alterations to it to reflect your own project.
Like everything you do in your 'other life' ... there is a right way and the 'other way.'
If you do things the right way, you are treated better ... get a better result ... get it quicker and leave a very good impression behind you, which helps a lot with your next development.
People go through their lives leaving 'foot prints' of their attitude ... their work practices, their ethics, that ultimately become their Track Record.
I am sure you agree having the word 'excellent' in front of Track Record is the only way to go. That's what I am all about ... make my life easier and the same for you.
I also teach you about:
Market Research The good news is that there are many things you can start doing 'right now.' In my ebook I get you started immediately on your own 'Market Research.’
I tell you to turn this activity into a pleasurably experience ... but one that is carried out regularly and with a system behind it.
For example if you are going to build some condos in a specific location, I want to visit every current development, not just when it is finished and looking gleaming ... I want you to see them at several stages during of construction.
These development show you the best the current market has to offer. Now your job has several facets to it, one of which is to not only assess the current opposition product, but to come up with ideas that will improve your design.
It is no use just repeating what is already being offered in the market. "Me To's" are not good enough ... this is where you add you're own brand of personal magic, that reflects your personality.
You only 'form' these ideas by KNOWING your opposition's product backwards. By feeding your mind on this stuff, your subconscious takes over, and you start creating.
So you see this is just one aspect of the work you will do ... but I'll just teach you to do it in a structured and more disciplined way.
Land Acquisition Like everything in life, there is a correct way to do this and there is the other way. I show you the right way as well as a step-by-step method of negotiating a purchase yourself, if you elect not to use an agent. Handy stuff, even if you don't ever use it, because you can use this knowledge to help you assess the agent who represents you.
Design Consultants Who are they ... what do they do for you ... and when to use them? All these topics are covered, which puts you far ahead. Remember your are really training to be a Development Manager for your own Self Managed Project.
So that means you are training to manage resources, both physical, human and financial to achieve your goals. Remember you don't have to be the expert in everything, but you have to be a manager of experts. And that is why you need to know how to use these guys.
Development Applications (DA for short)
What are they? ... why do I have to get one? ... do they cost me anything? ... who do I need to get me one? etc. etc.
In most Town Plans in most cities, towns, shires where they have them, the people we elect to the positions have, over a period of time, determined how they (the community) want their town to look ... the environmental feel of the place.
So now you come along and buy a old house, on a large block of land, in an area zoned for individual residential homes.
As far as you are concerned the house is dilapidated (beyond renovation) and the land could fit four modern, well designed townhouses, each with more usable living space than the original old house design.
Well, to be able to create those four townhouses you need to get permission and that's what a DA is all about.
Like everything you do in your 'other life' ... there is a right way and the 'other way.' If you do things the right way, you are treated better ... get a better result ... get it quicker and leave a very good impression behind you, which helps a lot with your next development.
Now I want you to click on the following Link.
It will take you to a list of the Topic Headings that show you the range of subjects I cover. Don't be daunted, I write in non-tech language and give my explanations in every day language.
Please Click The Following Link
Author of "Residential Development Made Easy"