UK Investment Property

Buying property in a joint venture: RISKS AND REWARDS

A joint venture (JV) is a business arrangement between two or more parties. The parties combine their resources for the purposes of buying a property. Generally speaking, JVs are usually between two parties, as this keeps things simple; however, you can have more parties depending on the size of the property purchase or its purpose.

Rewards : 

  1. extremely fulfilling to see how wealth creation and success can translate into better trusting relationships and a topic for constant conversation and exchange of ideas 
  2. new Fresher perspectives and out of box thinking 
  3. complementing Of Wealth with skills / time 

Risks :

  1. Dispute / disagreement can lead to the friction of friendships 
  2. lack of pre- determined structure / agreement can lead to time / energy drain 
  3. lack of Demobstrable JV structure ( for eg Loan documents ) can come in the way of securing further lending by conventional lenders 

What types of joint ventures can you use?

When it comes to a joint venture, you are only limited by your imagination. You can set up a JV in which one party provides the equity/deposit (20% plus costs), and the other party borrows the 80%. You could also split the deal 50/50 down the middle, whereby each party has half the deposit and also jointly borrows the money from the lender.

JVs work best when two parties can come together to leverage each other’s strengths and minimise each other’s weaknesses. For instance, you might enter into an arrangement with a friend or family member in which each partner contributes towards the deposit and/or the costs of managing the property investment. This enables you to not only split the costs in whatever manner suits both parties, but also share the risks.

When it came to our own JVs, we used an equity partner. This is how we purchased two of our properties. We found an equity partner who wanted to invest but lacked the borrowing capacity, whereas we had borrowing capacity but lacked equity. They put in the deposit plus costs and we borrowed the balance from the bank. It was a perfect arrangement – so much so that we did it again.

Our third JV was split 50/50: both parties put in 50% of the deposit plus costs and both parties jointly borrowed the money.

How to find the right joint venture partner

Finding a JV partner may not be as diifficult as you think. You can always start by discussing your intentions with like-minded friends, colleagues and family members and see what kind of reaction you get.

Investment programs and investor groups are also great places to meet similar, goaloriented investors who you may be able to partner with. It’s essential that you select a JV partner who has a strategy that aligns with yours, otherwise you may find that their agenda is not congruent with yours or beneficial for you.

When you’ve found the right person and you’re ready to enter into a JV, it’s important that you discuss all of your goals and your proposed outcome with your partner upfront as this helps to minimise any complications later on. 

Brought to you by puts the power of automation in your hands. Search, stack and market 200,000+ BMV deals (BTL, HMO and BRRR) with ROIs above 15% with the click of a button. Find High Yield properties with our efficient and easy-to-use tools.

Leave a Reply

Your email address will not be published. Required fields are marked *