Why do Joint Ventures?
Joint Ventures are a very effective tool that can be used when investors run out of their capital. They may have gotten to the place where the banks will no longer lend them any more money and financing qualification is no longer an option. I like to call this being “stuck”.
As a rookie investor, joint ventures can become a great option when you are just getting started in your real estate career. At that point in your life, you may not have any money or cannot qualify for a mortgage with a financial institution. You don’t have any legitimate options other than using other people’s money and credit to purchase properties.
In my particular case, I was heavily invested in a large dairy farm and all of our assets and cash were being invested back into our dairy. Back in 2010, we made a decision that we were going to exit the dairy industry and begin a new career as a real estate investor. I knew one thing for sure in this process, I was never going to entrust the proceeds of a large dairy farm into the hands of a financial planner and invest this money in the market. With all of our assets invested in the dairy at the time, I had no choice but to turn to Joint Ventures and begin to use other people’s money and credit to start our real estate company. I quickly got to work studying how to learn this skill and subsequently purchased 14 properties in one year using this strategy. Our real estate company grew to be about the same size as our dairy farm before we sold the dairy … all using joint venture money.
Joint Ventures can be a terrific tool to be used in conjunction with your portfolio. I always like to teach investors that you have two portfolios if you plan on using other people’s money. The first portfolio is your portfolio, where you have used your capital and mortgage qualification. The second portfolio is your partner portfolio, where you use other people’s money and mortgage qualification to purchase properties. The two portfolios can complement each other very nicely. Your portfolio can be considered the “pillar” of your real estate business, where you enjoy sole benefits from cash flow, mortgage pays down and appreciation from your properties. The partner portfolio (or the JV portfolio) can be considered as a complement to your portfolio. The fruits of the properties are usually not realized until an exit strategy is employed but the rewards are substantial and worth waiting for.
Kind Regards,
John C. Heeney
Tranquility Enterprises Inc ( Real Estate )
Glenroe Farms Ltd ( Private Lending )
We build LEGACY to create TRANQUILITY
519 808 7370
