A joint venture (JV) is a business agreement between two or more parties who seek to join alliances for the purpose of creating a new business entity or cultivating a new idea. Ideally each party brings a unique skill set to the mix, exercises control over the venture and consequently shares in the profitability and assets. The biggest must-have in a JV partner is an investment in the project or what I like to call “Skin in the game.”
Joint ventures are quite common in real estate investing but identifying the appropriate partners can prove challenging. Usually freshly pumped from a real estate investment seminar, we field many calls from those seeking a JV partnership. “You provide the money, and we provide the expertise” they exclaim “and we will split the profits 50/50.”
There are important considerations in a real estate JV’s such as property selection, closing on the property, managing the property and exit strategy for all investors, not only the passive investor. What newbie’s to the JV concept sometimes fail to understand is that knowledge can be purchased. I can retain experts in all of these areas, some at no direct cost to me.
My standard line to the JV with no skin in the game; “If I can hire you for your knowledge, then I don’t need you as a partner.”
A good JV partner can be worthwhile in most industries and is not reserved for real estate. Have an idea worth pursuing but perhaps just beyond your own capabilities? Find a partner that can help and explore what you can collectively accomplish by combining resources. It is much better to own half of something, than all of nothing.
We welcome your comments.