Joint Ventures: Different People Bring Different Things To The Party

Joint Ventures: Different People Bring Different Things To The Party

It could be argued that one of the best ways to carry out property development is by using Joint Ventures, where 1 (or more) person finds the property deal and another person or persons funds the transaction, and even another party could bring the design and construction expertise.

You could also say that any joint venture has all of the following factors, ie a  7-step plan for Joint Venture Blueprint comprising:

1. Preparation Of An Idea Or Proposal

2. Proof of Concept

3. Network

4. Fact Finding and Feasibility

5. Build desire

6. Seal The Deal

7.Deliver and Repeat.

The truth is that every project is different and unique so such a plan is not necessarily the right one for all circumstances.

Step 1: Preparation Of An Idea Or Proposal

What is the deal or proposition exactly? What is the point of the enterprise and effort? Where is the added value?

This involves questioning what you can bring to the deal and what you may need help with ie what your JV partner can bring to the deal.

Also where to find the most suitable JV partners, for different purposes, see step 3 about Network.

You need to tell everybody what you are doing, as word of mouth referrals and testimonials may provide introductions of property or property investors for your business.

Above all, as in any business venture, your own mindset is crucial to being able to achieve what you would like to do. You need to really believe in what you are doing and why, and that the deal is feasible to carry out and that it will be profitable.

Step 2: Proof Of Concept

The figures for the deal or project need to be verified and stress-tested by you and by peers before the deal can proceed.

You may have a property deal that falls into any number of strategies: It could be rent to rent, serviced accommodation or co-living(house of multiple occupations), commercial to residential conversion, hotel redevelopment, light industrial redevelopment.

Alternatively the deal could be on another scale altogether, for example a railway project which can link two countries and increase traffic and therefroe trade could be a worthwhile project. Anything so long as you can improve the value of the asset(s) thus creating wealth and the potential for profit.

Step 3: Network

Your network is your net worth and potential investors and joint venture partners for other purposes are probably located within your existing contacts, at least some of them:

Friends and family are the first place to start and the question: ” Who do you know who….”, may well produce some interesting results such as people who you never suspected had money, but they declare that they may have some funds to invest. After all if they have funds sitting in the bank they will be getting a negligible return.

You can offer them the OPPORTUNITY TO MAKE MORE MONEY.

Other Joint Venture partners may have expertise and or resources that they can bring to the party.

Step 4: Fact Finding And Feasibility

Once you have a list of potential investors and joint venture partners from your existing contacts you can fact find to establish just who is serious about entering into a joint venture and exactly what type of arrangement suits them and you best. Is the money they say they have actually available and in what timescale can it be released?

It is no good if it will take 3 months for them to remortgage to release money when you need money to purchase a hot deal within days.

It won’t do your credibility any good if you tell a prospective vendor you can complete in days, and you actually cant do that.

Large projects may have a long lead in time. There may be a number of iterations of feasibility, preliminary design concepts and redesign concepts before the right idea is found and proven.

Step 5: Build Desire

Once you have validated the proposition and established that there is potential profit in the deal and this is agreed by your peers, you can present it for their consideration and participation. This will sort out who is serious from who is just playing at this game. You will end up with a handful of serious potential investors and deal participants who are qualified and have the necessary resources to move forward quickly.

If a number of joint venture partners are to be involved, there will need to be an agreement about Heads Of Terms and a full legal agreement will need to be prepared.

Step 6: Seal The Joint Venture Deal

You have a real joint venture deal, and some pre-qualified potential investors so now you must seal the deal on the ideal arrangement.

The chosen investors’ funds are used for the property purchase and refurbishment, to whatever extent may be required. The property is exited by selling it on or refinancing in order to get the original investment out, and make profit.

Your joint venture partners who are providing design and construction resources will need to be paid, so contracts for this will need to be drawn up as well.

Step 7: Deliver and Repeat

You have the start of a systemized process because you have a deal that is in process, ie started. Once the project is delivered and the proceeds given to the joint venture participants, the investors have more money to invest. You have proven yourself as a reliable dealmaker and deliverer of profits many times (possibly 20% pa or even more) that which an investor can secure from the bank (likely to be around 1-5%).

The investor may well ask you if you have another project that he can invest in, because they have a larger pot of money to invest than before they did the project with you, so to put the money in the bank earning 1-5% is going to lose them money in a high inflation environment such as exists in the UK currently.

Its that simple, you use Other People´s Money and Resources in order to create wealth and profit from which you and your investors may profit.

If you have a site or property or even an idea for possible joint venture development than talk to Alan at Alpus Group on +44(0)7539141257 or +44(0)3332241257 or schedule a call with Alan on https://calendly.com/alanje or drop an email to alan@alpusgroup.com.