We should begin first by understanding what a Real Estate Joint Venture (RE JV) is.
Generally speaking, a Joint Venture refers to a business arrangement where two or more parties come together to undertake a project by pooling their resources- money, experience, and expertise- together to accomplish more than they could on their own.
In Real Estate, a Joint Venture combines real estate development expertise with financing capability or land or any other asset needed for the successful completion of a real estate project.
As an example, a land owner with a considerable expanse of land as equity may seek a developer or investor to provide capital for development. Both parties coming together as joint partners would develop an estate in a venture that would be considerably more profitable for both parties.
Some other assets that may prove important for a JV and which a party may bring to the table include:
- Construction Management
These notwithstanding, there is really no limit to the ways two or more parties may work together to make an investment happen.
Let us explore some of the great benefits of an RE JV and why you should consider it.
Increased Capital Base – Real Estate development can be very capital intensive. With a JV, partners contribute capital- especially in terms of land and cash, and this eases financial strain on the parties so they concentrate efforts on the development.
Development Expertise – With the right developer, a landowner frees themselves from the hassle of day-to-day supervision and leaves the project in the hands of the competent developer, from concept development, design and project management to completion and be assured of professional workmanship
Wider Market Distribution Channels – In a RE JV, there is increased likelihood of reaching a larger market through more channels because of the number of invested parties involved. If a reputable developer is engaged, that significantly increases chances of early returns.
Partial Liquidity – Depending on agreement, land owners, without having to sell their land, may be able to access cash to meet their liquidity needs through a request of Premium from the developer, while still maintaining interest in the development.
Shared Risks and Gains – Ultimately, a successful JV will generate the expected high returns for both partners. A partnership also enables spreading of economic and other market risks that might result from undertaking any worthy real estate investment, and that would otherwise be borne alone.
With the right JV developer partner, RE JV can be a highly profitable venture.