Joint Venture Question
I have a couple questions in regards to doing joint ventures where one party puts up the initial capital to purchase the property and the other does the work on the property (reno) :-
a) Is the only way to do these deals “Buy and Sell” where you buy, fix and sell to access and split the profit straight away? If not, what other ways exist.
b) If the person doing the reno requires a salary during the reno period, how does this work (terms)? Does this come also from the person providing the capital?
c) What kind of properties should you look at for these types of JVs and is now a good time?thanks in advance.
You can do various things such as buying your JV partner out after a certain period, selling the property, or they may buy you out.
If the person requires a salary, that is going to make things harder. How is going to pay? – Your JV partner may not be happy as this will eat into any profit you are making.
Terryw
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I find that to do a joint venture or syndicate it should be for a larger project. If it is a development project you need to feel comfortable with who you are working with.
I have been involved in a syndicate to acquire an apartment complex in the United States. It allows buying power and greatly reduces the risks involved in going it alone.Nigel Kibel
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This is only about 50/50 profit split JV’s, as this is the only way I would do it at this stage.
There are dozens of ways only limited to your imagination. If there is a curtain way that you want to do it, it’s just up to you to sort this out in a win/win agreement with you’re JV Partner.
You might want to provide the capital and the jv partner does the work on a reno then you rent it for +CF and the JV opts out taking a percentage of what the house might be valued at once the Reno is completed.
It seems odd to me to pay someone a salary while doing a JV because then would not you then be just employing a carpenter. Unless if the JV needed a salary which was taken from the overal percentage of the money split at the end which is normally 50/50. So if paying a salary maybe word into the agreement that it will reduce the percentage split at the end.
I think it is a reasonable strategy to apply in this current climate but curtain factors need to be meet , careful planning and the right property to apply this strategy to is very important as the margins are very tight and particularly if you are splitting the profit 50/50.
One of the key things is that if you are providing capital that you have a well planned out strategy to maximise tax savings with the use of a trust for example. And or waiting 12 months to sell if selling so as not to tricker the 50% CGT.
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