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How do Joint Ventures work?

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    Previously, we looked to answer what a joint venture is and how they help property developers. In doing so, it has brought up the subsequent query of how joint ventures work. For aspiring developers and investors alike, it is most definitely worth your time to take a few minutes to read up on these topics. Informing yourself is the first step to success, after all!

    Throughout my many years in the industry, I have at times gone it alone. These experiences have always taught me one thing: two heads are better than one. That’s why I started up the JH Joint Venture Fund! The benefits ultimately outweigh the detriments.

    How does this whole process work, though?

    A joint venture is a partnership between two individuals looking for the same outcome. For example, in my particular case, the aim is to use my own experience within the industry to help others complete the purchase or development of a project. Perhaps they don’t have enough funds or lack the know-how when it comes to developing. Whatever it may be, I am there to offer a helping hand. Of course, this will be at the cost of half the profit. But we both gain – both in capital and for my partner in their level of experience. It could also lead to further business in the future.

    • Generally, the process involves both parties:
    • working temporarily;
    • contributing resources;
    • setting out to accomplish a mutually beneficial goal;
    • sharing ownership of the joint venture’s assets and liabilities;
    • being legally independent (except for work completed together during this time).

    When setting out all of the terms and conditions, it may become apparent that one party contributes more funds to the project than the other. I will, of course, need to make my money back and may receive more of the funds in return. But we will both make a profit.

    I always aim to go about it with a 50/50 share, making it easier for us to work out the profits when exiting the venture. It also means that there’s less pressure on either side. Equality is key to a perfect partnership. No one person should be providing more or less.

    What is the most crucial aspect?

    For me, I say it’s in the execution. If a property investor comes to me and has their idea in mind, all planned out, it comes down to me to help carry out the whole thing. Perhaps the plan isn’t fool-proof and needs a few tweaks. We’d go over them and iron out all the negatives. Then, following that, the focus will entirely be on doing rather than saying.

    It’s all good being able to convey all your ideas and carefully plan it all out. But when it really comes down to it, the main focus should always be the execution.

    The agreement

    Once we understand what we each stand to gain from the joint venture, we must agree with terms in a written contract. Although not legally required, it is good practice to carry this aspect out. It makes sure we both understand what we’re getting into and shows we’re both committed.

    It should specify what we will both contribute, our individual rights as well as duties, and how much profit we will both want to receive at the end of the venture. It must be precise.

    When discussing these types of agreements, it’s always possible that they may fall apart. This could be down to disagreements between us or unrealistic expectations. It’s therefore imperative that we take the time to thoroughly talk over these features and work to a final decision.

    Where to go next.

    If you would like more information on our joint venture agreement, then please get in touch today. Send your queries to info@johnhowardjointventurefund.co.uk, and I, or a member of my team, will reply as soon as possible. We hope to hear from you soon and welcome your interest!

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