Structuring Joint Ventures. Legal Pitfalls and Possibilities.
Have you reached the end of your purchase power but still want to own more Real Estate? One option to keep the asset train running is to consider a joint venture. So what does this mean? Difinitively put, "An association of persons for the purpose of a particular commercial undertaking with a view to mutual profit with each participant usually, but not necessarily, contributing money, property or skill."* A Joint Venture Agreement ( “JVA”) creates a legal entity through a contract, and identifies the major rights, duties, liabilities and obligation of each participant in the joint venture. More simply put - a joint venture is finding other like-minded investors to work with. This could be the most beneficial to all.
One of the advantages of a joint venture is that each of it’s members maintains a distinct legal entity from the others and each will only be held responsible for it’s own personal errors against third parties. Each member of the joint venture retains ownership of his or her property.
What is expected of the join venture partners? A group of people pooling together their resources can bring different contributions to the table. Perhaps you have the cash for a down payment but are at the top of your debt to service ratio. Finding other partners can allow you to use their under realized potential to help qualify your party to own more investment properties. Another contribution could be sweat equity. If one or more party members don't have the time to tend to the investment another member could add their time and energy to renovate or manage the unit.
