Have you just finished a 3-Day Boot Camp?
Or maybe just you’ve completed an iLoveRealEstate.tv Seminar and now you’re keen on getting your real estate investment career started?
You’ve studied the course work…
Gotten yourself familiar with the real estate due diligence process…
And even found a partner to J.V. with…
What could go wrong?
First off, let me tell how thrilling it is to see my students do all their studying and prepare themselves for their own success…
It’s both gratifying and exciting at the same time and tells me that I’m doing exactly what I should be doing!
Now, about that J.V. partner of yours…
Before you go head first into a J.V. partnership, you need to be certain that you both know what you’re getting into…
I’m not trying to slow anyone down or discourage you from moving forward on your goals and dreams…
But you do need to make sure that your J.V. partner is the right partner for you.
When your J.V. partner is someone you don’t know, most people are extra cautious before getting into a deal…
It’s very much like a marriage, you know?
All the fun bits are great, but you still have to live with one another day after day and make the relationship work, don’t you?
But it’s the “familiar” J.V. partnerships that often have a hard time of it…
There are several steps you need to take to make sure that you and the J.V. partner you know so well, have a clear understanding of what you’re about to do…
Money well spent
The first step is to draw up the partnership agreement.
Now, for heaven’s sake, don’t think you’re going to write the thing yourselves…
That’s a BIG MISTAKE.
Sure, you should both talk about the specific duties of each person…
As well as the expectations of each partner in the deal…
You should be sure to identify limits of money committed to a deal, a time table to finish the deal, and an acceptable return.
You will also need an operating agreement that provides for contingencies like sickness or death of a partner, of if there is a disagreement that prevents the partners from working together…
Or what happens if a partner doesn’t live up to his responsibilities.
And of course, you will need to agree on the splitting of profits and whether or not a follow up deal will be part of the plan…
That’s why you will need to spend the money for an experienced real estate lawyer to draw up the agreement…
Because it’s money well spent!
“But Dymphna,” you’re saying to yourselves, “My partner and I, we’re best mates. We’ve known each other for 20 years!”
Married J.V. partners?
My advice: If you want to remain best mates for the next 20 years, a written agreement is the best way to do that.
I also see quite a few married couples at my events and taking my courses. I think that’s great!
In some ways, married people can make the best partners because they’re both very familiar with the other persons under all kinds of circumstances…
Often, one spouse will have inherited a bit of money that will go toward their first deal…
And they don’t have unenthusiastic or unsympathetic spouses to worry about!
You can’t always say that about your best mate, not matter how long you’ve known each other…
A spouse can change a partner’s mind or at least may it difficult when things don’t go exactly as planned…
Which is almost always the case.
J.V. Partnership will test your fiancée…
Another J.V. partner situation I see is the fiancée J.V. partnership…
Both work and have saved a bit of money to invest…
These can be quite interesting because, like the best mate partnership, you may know each other quite well in many ways…
But it’s not likely that you have been with one another in every scenario, especially in a business relationship.
You could say that having your fiancé as your J.V. partner is a good way to test the marriage waters before jumping in up to your neck…
Because as you’ve heard me say many times at my events, things rarely go according to plan!
There are always problems, unexpected expenses, delays, and other obstacles that will get between you and completing your deal…
If you and your fiancée can get through your first J.V. real estate deal successfully without one or the other (or both!) having had enough of the other, then your marriage might just work!
Come to think of it, this might be a whole new area for me…
The simple fact is that you should plan for things not to go to plan in your agreement, and have procedures to address those when they come up.
That way, there are already steps to take that you have both agreed on ahead of time.
Will putting an operating plan in writing ahead of time solve all your problems all the time?
Of course it won’t…
But it will get most of the sticking points out on the table before you take on your mate, your fiancée or, in some cases, another family member other than your spouse.
Remember, it doesn’t matter who your J.V. partner might be…
If you don’t get every detail you can in writing…
If you don’t clearly identify each partner’s responsibilities…
If you don’t have complete clarity your financial obligations and steps to take when things go wrong…
Then you may well end up with your worst J.V. partner!
Fortunately, there’s no reason that has to happen…is there?