Avoid the Top 20 Joint Venture Landmines

 

3311480215_281771e33c_o

By Russell Westcott

I’ve been in the real estate business for a long time and I’ve made my share of mistakes. I’ve also made it my business to learn everything I can from the real estate “giants” who’ve walked before me.

Here are the 20 most common Joint Venture landmines you can avoid by putting someone else’s experience to work in your business.

1. You go it alone. Success depends on building a team of real estate agents, lenders, lawyers, bookkeepers, accountants, property inspectors, trades people, property managers and money partners.

2. You let your team down. The members of your team will help you make money and vice versa. Never forget the win-win equation.

3. You choose the wrong team members. You are the real estate expert. Pack your bench with those who offer what you cannot. Ask yourself: What kind of investments do I want to pursue? Who can help me do that? Line up these people before you make your first offer. Replace team members when necessary.

4. You lack confidence. Sophisticated real estate investors practice the seven principles of attraction: abundance, expectancy, imagination, giving, decisiveness, expertise and resiliency. Not sure what that means? Pick up a copy of Real Estate Joint Ventures: The Canadian Investor’s Guide To Raising Money And Getting Deals Done.

5. You chase the money. Never pursue a deal that doesn’t fit your business model just because you want a prospect’s money. Don’t give away the store to keep the front door.

6. You lack insight. Understand the fundamentals of how this business works. Learn why Level 1 candidates carry significantly less risk, and then act accordingly.

7. You sit still. It takes action to attract leads. Make sure your marketing materials are professional. Set goals for lead cultivation. How many people do you want to talk to about real estate investment on a weekly basis? Attend meetings, set up appointments and network. Send letters and e-mails to request follow-up calls or visits.
8. You waste time. Apply your due diligence to things that matter! Focus on finding the right partners for good deals and never skip the filtering process. The information packages you send to prospects should include an Expression of Interest letter and a special report about why, where and how you invest. These packages will evolve over time. Don’t waste time trying to get it right the first time. Learn as you go—and you’ll go faster as you learn!

9. Your prospects renege. While you can’t avoid this landmine completely, a quality filter will help separate the winners and losers. Never let a prospective JV candidate skip your filtering process or confuse business with friendship/family.

10. You let confusion reign. Take control of your JV deals and don’t let a prospective partner undermine your business goals. A JV Worksheet, letters of intent and a formal JV Agreement spell out the details of how a particular deal works. Use these documents to make sure that no one can claim “ignorance” down the road.

11. You pick the wrong deal. Focus on deals that make sense and always have a Plan B.  If the deal is not good enough to swing completely on your own, it is not good enough for you to risk someone else’s money. Always ask yourself: “Would I put my mother’s life savings into this deal?”

12. You don’t provide enough information. Learn from every experience. If a potential money partner turns down a deal, find out what you could have done to get them to say yes. Apply that lesson to your next deal.

13. You are too optimistic. Never sell a deal as perfect. Make honesty your friend. Show JV prospects how you look at what’s “behind the curtain” and encourage them to also ask the tough questions.

14. You guarantee an outcome. There is no such thing as a guaranteed JV real estate investment. Talk in percentages and be realistic about what can impact those figures.

15. Your partner walks out as the deal is ready to close.  This landmine is impossible to completely avoid, so do whatever you can to secure commitment! Pursue a partner’s word, cash in your lawyer’s trust account, an Expression of Interest letter and a Letter of Intent. If a deal falls apart as you’re ready to sign the legally-binding agreement, put your Plan B into play.

If you’re not sure what a Plan B is or how much to ask for a deposit, it’s time to get the facts! Pick up the Canadian best-selling book, Real Estate Joint Ventures: The Canadian Investor’s Guide To Raising Money And Getting Deals Done.

16. Your JV Agreement is not enforceable. Errors or omissions on your JV Agreement can leave you vulnerable. Seek legal counsel early and make sure your JV Agreement is thoroughly vetted by your lawyer.

17. You sacrifice legal diligence. Sophisticated investors make sure their money partners have their JV Agreements vetted by their own lawyers. If a partner refuses to get independent legal counsel, have them sign a document that says they were advised to do this and opted out.

18. You keep secrets. Always provide full disclosure to your lender and lawyer and keep them apprised of changes. Anything less could constitute mortgage fraud.

19. You don’t provide quality communication. Money partners want information and it’s your job to provide it. Use regular communications as a way to remind them of why you are good at what you do.

20. You sell yourself short. Make sure your JV partners know what you bring to the deal. Show them why you are worth 50%.

If you’re serious about taking your real estate investment business to the next level, read through these 20 landmines again and jot down some ideas about what you can do to avoid them. Remember: it’s one thing to have quality information; it’s another to act on it!

Russell Westcott is a Canadian Real Estate Investor, Educator, Researcher, Best-Selling Author and member of the Management Team with the Real Estate Investment Network (REIN).  He uses his personal experience to present his Advanced Buying Strategies™, and Joint Venture Secrets™ that have helped Real Estate Investors think creatively and raise investment capital to buy their next piece of real estate. 

{{cta(‘5510749d-c854-4e57-a2b1-ca60ac46ede8’)}}

Keep up to date with the latest REIN news and events! Subscribe now:

Stay Connected

All Access

Twitter Feed