Joint Venture is a term used when two or more individuals come together on a project. Joint Venture investments are common in property to help grow an investor’s property portfolio when they may not have the funds themselves, but do have expert property knowledge. It can seem hard finding those partner lenders to begin with, and ensuring that they can trust you with their funds may seem a difficult task.
Different investors will all be looking for different things but below are some of the main things that an investor will be looking for from you.
Credibility: A Potential Joint Venture partner will almost certainly be looking for credibility from you. Interestingly enough credibility may not always mean the amount of properties you have in your portfolio. A common thought is that this may be the case, however one of my first Joint Venture partners said that they found me to have credibility because of my knowledge of my investment area. Finding and researching your own investment area is key when looking to become credible and investable.
Regular inclusion and updates should they want this: Including your investment partner in the property deal and liaising with them regularly will be of great value to them. Being able to set a promise in place from day one that the other person will also play a part in the decisions that are made, allows them to feel secure and trust you with their money. This of course is as long as being included in the property side of the investment is something they want, as not all partners have the time, or will want to do so. The key is to find out how included they wish to be.
Exit: A Joint Venture partner will want to know what there exit strategy is from the particular venture should anything change or happen that is unexpected. They will want this documented and usually want more than one exit from the venture should they need it.
Competence and reliability: A potential partner wants to be able to see that you can and have done property investment successfully. Providing examples of property deals you have previously sourced for yourself or others, or showing what you could do with current property opportunities available, shows someone that you are competent in investing in property. Having referrals or testimonials from previous partners or individuals who know of your work in the property world, can also build someone’s trust in you. A potential partner wants to know that their money is secure and that you will use it to its full potential.
Security: Private investors will want to know that you can provide them with financial security at the beginning of the partnership, and let them know exactly where their money will stand in the property investment. I always try to put myself in the shoes of the investor and think “how can I reduce their risk and increase their security”. This is absolutely vital.
Different investors will want different levels of security in a particular venture. Explaining the security you can offer to an investor early on will build credibility and trust early on. This will mean that the investor will know where they stand and can voice any concerns or changes they want to make. This will highlight the agreement for both this property investment opportunity and others in the future.
There will be different ways this can be done, such as having the property in joint names or under the name of the investor. We would always recommend seeking legal advice to make sure all points are considered and covered off legally to ensure security.
Reassure their concerns and make sure it is a win/win: Make sure that the investor has no concerns, as you are looking to build an on-going relationship with a potential investor. By solving any apprehensions they may have about the property investment from day one ensures them that their money is in safe hands. Ask them if they have any worries or something they are concerned about with the investment, this allows them to also feel involved with the practicalities of the property deal. Being able to answer or solve any issues that your partner has, gives them a better understanding about the world of property investment, and provides trust and security.
Get everything legally done: In my experience you certainly want your Joint Venture agreements tied up legally, whether it is someone you know personally like a family member or someone new. This is to protect both of yourself and your partner in the venture, to ensure you both know where you stand and there are no surprises later down the line. It is always worthwhile sitting down with your potential partner to make sure you go through the finer points of the arrangement with them first, but then a qualified lawyer will be able to guide you in the right direction and make sure that all the relevant points have been covered.
As long as you continue to grow as a property investor and expand your relationships with like-minded others, you should find it possible to find joint venture partners and ensure win/win solutions.
Always make sure that you seek legal advice when researching Joint Venture partnerships or partner lending. We also recommend you refer to the FCA rules and regulations on Joint Ventures (PS13/3) to ensure compliance.
- Peter Iwaniszewski, December 2014