An Agreement To Joint Venture

Finding the perfect investment property and then discovering someone else is interested in the same house would bring out the competitive spirit in some people. For Denise Dunn, a 45-year-old mother of four children from Adelaide, it was an opportunity to collaborate with more experienced investors.

JV Partners : Michael, Denise, Carol and Steve

Denise and her husband Michael now have four successful Joint Ventures behind them and have built a strong and pr ofitable property portfolio.

Joining the Club

“My sister-in-law, Lisa, was so into this investment group that I just had to join as well. It gave me the education and absolute focus I needed. At first, Michael and most of my friends thought I had joined some kind of cult! I met so many inspiring people, who changed my mindset around money and investing as well as the way I view life. I love it. Michael and I attended seminars, networked and read investment and motivational books, and after revisiting our goals we knew property investing was the direction for us”.

The couple entered their first Joint Venture by accident. “My husband and I were looking for our first residential property to buy, subdivide and reno. We located a house at South Brighton, Adelaide and thought it may be suitable, so sought advice of a friend I’d met through the same investing group. Carol and her partner, Steve, already avid property investors, lived in an adjoining suburb. They had extensive local knowledge and the experience of analysing a deal. It turns out that they had also been looking at this particular property. As the result of a Saturday of open inspections we find ourselves entering our first joint venture”.

 
                        South Brigton property Before

“We paid $470k for the South Brighton property in January 2007. It was a bungalow in average condition on a corner block of 860sqm. We subdivided 400sqm off the rear, and then spent $65k on the reno. We sold the renovated house for $612,500”.

  
                        South Brighton property After

“We then spent $180,000 on the subdivided block (valued at $340k) and built a 4 bedroom home, which we have held and now has a bank value of $640k”.

That's over $500k profit to the Joint Venture partnership.

Joint Family Venture

“Our second Joint Venture was with my brother Trevor and his wife Lisa. That deal was based more on need than profit. My mother owned a house on 2000sqm of land at Clare, approximately 155km north of Adelaide, as well as the adjoining vacant block of 1000sqm. Mum had moved into a smaller house for health reasons, so the house and block were on the market. She hoped it would sell in the high $400ks but there was little interest. An auction campaign failed and she rejected an offer of $380k”.  

The Clare house Before

 “The project took 13 weeks and cost $66,000. The house sold for $520. Most of the comparable homes on sale at the same time as the un-renovated house are either still on the market or have been withdrawn from sale. I believe we were successful because we totally changed the target demographic”.

The Clare house After

Play to Your JV Partners’ Strengths and Weaknesses

Denise believes the key to a successful JV partnership is to ensure you have the correct mindset and a complementary mix of personalities.

“We know our strengths and weaknesses. We are highly motivated and visual people, however we realise our analytical and numbers side needs some work along with our time management skills. These strengths and weakness need to be balanced and therefore we are grateful for having met Carol and Steve. They are both brilliant with the analytical, numbers and planning scenarios. Our Joint Venture Partnership is balanced”.

“Carol and Steve’s roles are larger than ours, so that is reflected in the J.V Agreement’s breakdown of the profit. However, you cannot split hairs over who has put in one hour over someone else, as all input is hard to quantify. Countless hours may go into sourcing products; quotes etc. and we all agree, “What goes round comes around”. As much emphasis should be placed on the experience and the journey as on the profit”. 

1. Treat JV as a business venture.
   
2. Leave emotion at the front door.
   
3. Establish everyone’s strengths and weakness, and allow each party to contribute in their area of expertise.
   
4. Exercise caution if your JV is with longstanding friends. (It’s that old saying: Business and friendship generally doesn’t mix.)   Our family JV had clear guidelines and was sorted prior to us commencing.
   
5. Communicate openly – trust your partners to do their jobs; don’t interfere.
   
6. Establish a rapport and nurture relationships with tradespeople (looks after them and pay them on time).
   
7. Get three quotes or more.
   
8. Be proactive - if someone hasn’t got back to you, chase them up continually. “The squeaky wheel gets oiled.”
   
9. Be flexible. If things change, work with the changes.
   
10. The JV needs to be finalized at end of each deal.

Denise recommends first time JV investors do the homework and then take the plunge.

“You may not know exactly what it is you want but just work towards it, do courses, network, read, get out and look around and most of all ask lots of questions. Take the first step. It may be out of your comfort zone, but it will be most rewarding. It’s about the journey”.

Note:
This is an extract from the full story. If you would like to read the full article click here .