A property joint venture is more than just a business arrangement. It is a relationship that should be built to be sustainable over the long-term. Making JV deals work requires honesty and open communication. Today we look at the five crucial elements that underpin every successful joint venture partnership.
1. Be Honest
The first thing that your joint venture partner will expect from you is honesty. A property joint venture is about more than just money or property deals. It is about forging an ongoing relationship.
Firstly, you must be honest about yourself - your experience, your skills, your situation.
For instance, let's say you want to be a property sourcer. So, you want to make a living finding property deals for your clients.
The worst thing you can do, starting out, is to talk yourself up to the extent that you lying about your past.
If you have never done anything in the property industry before then you need to say so. You must be honest.
If you have not got any experience, don't worry. Some investors will be fine with the fact that you are just starting out. What they will not be fine with, is if you are dishonest and describe to them a wealth of experience that you do not have.
A Lack Of Experience Is Often Not A Problem
Some investors will be fine, working with someone who is not experienced, because they are looking for other qualities.
For example, they might be looking for tenacity over experience and maybe you are a tenacious person, someone with a clear idea as to what exactly, you want to achieve.
Maybe you are hardworking and willing to do plenty of viewings, put in plenty of offers, put plenty of deals in front of them.
If that is what an investor wants out of a partner, then even without a wealth of experience, you could be the right person for the job.
Leveraging Your Contacts
Another thing you could bring to the joint venture partnership is contacts. Even without experience if you have contacts that your JV partner does not have then you could be bringing a great deal of value to the relationship.
So, if you know some good estate agents, a great refurbishment team, a mortgage broker, then your potential client might value this over and above the fact that that you haven't been responsible for fifty-plus developments in the past.
Most Importantly, Tell The Truth
If you want your JV deal to work then you must be honest. Not only is this about trust (and if you lie and are found out, that trust will be gone) but it is also about finding the right partner.
When you go into a joint a venture the two of you must be a perfect fit. If one of you has been dishonest at the start then there will be no way of telling if the fit is going to be right.
2. Have A Clear Plan Of Action
The Joint Venture Agreement
With JV Deals, it is essential to have a clear plan of action in mind.
This is where a joint venture agreement really comes into its own. An agreement should outline exactly what you and your partner want to achieve through your professional relationship.
It is by working on the joint venture agreement that you are really going to find out for sure that you are a good fit together.
Joint Ventures With Property Investments UK
For example, the joint ventures we do at Property Investments UK tend to be flip projects. In other words, our preferred strategy is to buy a property, refurbish it and finally, sell it on.
With this in mind, it wouldn't work for us if, during the initial consultation stages, a client told us that they hoped a joint venture with us would help them grow their portfolio.
This would mean that the goals of ourselves and our client would not be aligned. We would be looking to sell the property and our client would be looking to keep it.
When you find yourself in this situation, where you both want different things from a deal, then you should both think long and hard about whether a JV deal between yourselves is the right thing for you both to be doing.
Having A Plan That Works For Both Parties
It is important to have a very clear idea as to what you want to achieve by doing a JV deal but, it is just as important to know what your potential partner wants to achieve as well.
To make sure you understand each other you will need to sit down and set some goals. You should also set these goals down on paper in the form of an agreement. Writing them down will not only help you to set the terms of your relationship but will also help you think more logically about whether or not your aims and ambitions are properly aligned.
3. Goals That Align
It isn't just that your goals and those of your prospective client should broadly align, it's that they should align when it comes to the specifics of the deal as well.
For example, if you want to go for a high-end refurbishment but your JV partner wants to go for something less expensive, then there is a mismatch. This is the kind of detail that you need to go into at the beginning and not something that you want to discover when you are deep into the project.
So, you want to make sure that you are both aligned with regards to goals, ambitions, aims and ideas about where you want the project to go. But, that is not all. You need to also make sure you aligned on other things such as morals and ethics. Combined, these are the elements that make for a strong, successful joint venture partnership.
4. Complimentary Skill-Sets
What you want from a joint venture partnership is for the whole to be greater than the sum of its parts. One and one shouldn't equal two, it should equal three or more.
In order to make this happen, you need to both be bringing different things to the table.
For example, maybe one of you is very good at finding deals and the other is good at selling. Maybe one of you is good at finding tenants whereas the other either has funds or access to finance to make the project possible.
What is important is that skill-sets of both partners mix and merge to create something valuable. If you are both offering the same thing then the joint venture probably won't work very well.
What Happens When JV Partners Are Too Alike?
When two people, working with each other in a property joint venture, are too similar in terms of their skills, then sometimes, conflict can arise.
What happens in this kind of situation is that tasks become difficult to divide efficiently. Without efficiently being able to divide the tasks, progress can be slow and it can be frustrating.
In truth, this is because when both people are capable of doing a job, more often than not the job will fall to the more proactive worker. And, with one person doing more than the other, less is going to get done.
5. Good Communication
Good communication is key to any project and property joint ventures are no different. It is also connected to the principle of honesty that we discussed above in point one.
You might find yourself in a situation where everything is going great, everyone is happy and making a lot of money. Then, suddenly, something changes; something that threatens to jeopardise the project.
If you are the person that has noticed this change, you must tell your partner right away. Too many people sit on the bad news for too long, keeping it to themselves.
This is the wrong approach. You should be honest and be quick with how you communicate. The lines of communication need to always be open.
In a property joint venture, you need to be able to work out the best way forward together, as a partnership.
When People Don't Communicate, Minor Problems Become Big Issues
We had something crop up recently with a joint venture partner that involved nothing more serious than a broken fence. But, if it hadn't been for good communication, the issue could have become more serious.
So, we had finished our refurbishments on the property and it was about to go on sale when we noticed the broken fence.
This is the kind of thing that is easily missed and is also the kind of thing that can stand in the way of a quick sale.
It wasn't a big issue but it was unsightly and it needed fixing. It was a simple job but exactly the kind of issue that, were it not for the various parties being open with each other, can go unnoticed.
It is things like this that show how important it is to keep lines of communication open.
So to round things up, these are five things you need to do to make sure you property joint ventures run a lot more smoothly.
Honesty, complementary skills (so you are not treading on each other's feet, communication, a clear plan of action and having aligned goals.