A joint venture in property investing is an agreement between several parties like builders, developers, and financiers. These temporary agreements are formed to build, for example, a housing development or another project.
Typically, joint ventures involve one partner who brings funding or finance and another that works on the project. When structured properly, these deals can help deliver good returns. For investors, arrangements like joint ventures allow them to take a share of the project’s profits. While for builders and developers, the investment will enable them to access funds and complete more significant projects.
Property Joint Ventures: Tips & Tricks with John Howard & Tony Gimple
In this video, Nicholas Wallwork, CEO of Property Forum, discusses joint ventures with property experts John Howard and Brand Entrepreneur founder Tony Gimple.
While discussing various tips & tricks involved with joint ventures, the big takeaway is that all parties should take time to fully understand the implications of joint ventures, especially from both a tax and contractual angle.
Some of the topics discussed are highlighted below.
Why Get into a UK Property Development Joint Venture?
For John Howard, who launched a joint venture fund last year, the answer is quite simple: profit. While work can be about more than just money, John cautions against losing sight of what motivates each project, “If the outcome of the partnership doesn’t put meat and potatoes on the table, what’s the point?”
Tony Gimple furthers this by suggesting, “The real key — apart from making a profit — is knowing who you’re going to get into bed with. You are hostage to their fortunes.” Tony goes on to say that investors and developers need to prepare themselves for what could go wrong. More pertinently, investors should have a way out should market conditions turn, or their venture partners fall on hard times.
Who Makes a Perfect Joint Venture Partner?
For these UK property development experts, the best deals are often the most simple ones. John advocates partnering with an aspirational partner who has found a good deal.
Tony agrees that chemistry between partners is essential. As Nicholas Wallwork notes, “Both parties need to want to work together in the first place. So the importance of this is that property is a people business.”
What are the Tax Implications of a Joint Venture?
John and Tony both underline the importance of clear planning from day one. Getting the right advice from the beginning is crucial. Additionally, investors should understand how they will be dealing with profits and potential losses.
John adds the structure of his joint venture fund is to invest in the business and allow the developer to maintain 100% of the shares. As Nicholas notes, another essential part of any joint venture is securing PGs (personal guarantees). He goes on to add that “You used to be able to get away with fewer PGs, but since the tightening of the credit crunch, everybody has them”.
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