Real estate is a great industry for investors. Because of constant demand and limited supply, it’s a place where people can make a lot of money. However, it’s very expensive to develop real estate. There are also a number of specialized functions within the industry. People need expertise to get things done in the world of real estate. They need to ensure that everything is thoroughly reviewed for joint real estate ventures.
These are just some of the reasons that most real estate projects take the form of joint ventures. Most joint ventures have two partners. One provides the capital, while the other provides property management expertise. Most real estate joint ventures are made up of two parties. Some have more.
A joint venture agreement helps parties divide responsibilities. In developing real estate, these include finding property, purchasing it, managing the property and building on it. Each of these steps can be complicated. For example, it may be necessary to secure additional financing before purchasing a parcel of land. The building phase requires contracting with workers, purchasing supplies and taking care of permits and reporting. There are a lot of moving parts.
Joint ventures help to streamline building projects. They can be essential in some cases. Consider the difficult logistics involved when a company wants to develop real estate internationally. In these situations, one partner has the expertise and local knowledge, while the other has the money with which to finance development. Sometimes, the capital partner providing the money is a silent partner. In other cases, the capital partner is more hands-on.
It’s important to outline the parameters of the joint venture agreement carefully before getting started. The joint venture contract will outline how profits are to be shared and what capital will be contributed by each party in the venture. The agreement should also outline who is in charge and how, exactly, decisions will be made. It benefits each party to the contract to have rights and responsibilities spelled out in writing. Finally, the duration of the agreement should be specified. It’s a good idea to outline when the partnership created by the joint venture agreement will end.