Property investing gives you the opportunity to help others and still make money for yourself.
In the last few weeks, I have been speaking to a very good friend of mine who has gotten into a bit of an impasse with a joint venture.
There are 4 of them who got into this joint venture and at the beginning, they all put in various amounts of money into the deal to make it happen. The amounts were not equal. Each party put in a different amount. They bought the deal and refurbished it then set about renting it out.
So far so good, the deal rented well. Now in the deal, there were multiple properties, so they tried different strategies for different units. For example, one may be rented fully furnished as a holiday let, like AirBnB. One may be let as a family let. One my be rented as social housing. One could be flipped. One could be rented to sharers.
Now problems started when they couldn’t agree on which was the best strategy. Also because they had not put in equal amounts to the deal there was a tendency to say well I have put in more therefore my vote should count for more. Some, who put in less, felt they should get an equal share of rent or profits at sale. The reasoning behind this was that although they put in a smaller amount, without their money no one would have been able to buy the deal! . So the impasse was arrived at.
The stopped renting out the properties because they couldn’t agree and so nothing was coming in. Plenty was going out, such as, bills and council tax, and some loan repayments which were also taken out against the properties.
Now you may not realise it, only this is not an unusual situation.
When people do not set up the joint venture correctly at the beginning this can happen and does often.
Not having clear guidelines on how the joint venture will work is a disaster waiting to happen.
People can loose a lot of money and worse still you can loose very good friendships and relationships.
Whenever I work with a group of people in a joint venture I always set out the way we are going to work together very clearly at the beginning which always protects you, them, the relationships, and everyone’s money.
Things have got to the point where no one agrees, some think they are entitled to more than others, friendships and relationships are very strained and the properties are empty bringing in no money while bills are still going out. They had even tried to sell up and pay everyone back their initial investment, then close the joint venture. Unfortunately, the properties did not sell at the price they needed to clear all the debts and initial investments they put in.
This is when my very good friend contacted me. As a professional investor you must evaluate a deal before you can do anything.
Yes, it is a very good friend of mine, however, there is no point in buying something that puts me in a bad financial position no matter how much I want to help them out I /You just can’t do it at my /your detriment.
This is another very important lesson here.
You must not put yourself in a bad financial place to help someone else out of one!
So I looked at the deal and it wasn’t amasing, it didn’t get my tail wagging, as one of my mentors says! However, it was an ok deal.
The figures meant that it would produce an ROI (return on investment) of 11%
There will also be some capital growth.
So buying them all out of this deal would not put me in a bad financial position.
That means I could get involved.
Now my friend still wants to be involved in some way and be part of any new deal. That is set up as a joint venture with me involved.
As you may have guessed setting up a new joint venture with me will mean having all the right things in place to stop this whole pattern from happening again. This won’t be a problem as they have painful first-hand experience of not having the right setup when they bought the deal originally.
There is still a lot of discussions and agreements to be made before I go ahead with this and perhaps they won’t want to go down this route or perhaps I find something during the discussions that I am not happy to accept.
This could mean I don’t go ahead with it.
That is the nature of the business.
However in this case I am confident we can get to an agreement where they are happy, all the original joint venture partners are paid back and I can make some money too as well as adding some more income-producing assets to my portfolio.
Now that’s a win-win, everybody wins!!
Joint ventures are a very powerful way for groups of people with small amounts of money to get into property investing.
If you are looking to get into a Joint Venture buying property(s) and want to protect everyone and have very clear guidelines then book in a call with me and I can help.
Book at https://cleverpropertyinvesting.co.uk/contact-us/