Right now we’re going to discuss joint ventures.
Featuring:
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: It seems there’s a great opportunity in real estate if you do it properly, and that is to partner with someone who has some strengths in areas, either financing or skills or something that you do not, and then you can go in toward an opportunity, a venture together. You see that a lot, I’m imagining, in your world, Bob.
Bob Nelson: Yes, I do. Do understand though, that if you own something by yourself, you are the sole decision maker, both the good decisions and the bad decisions. You’re also the total financial base, so if you’re running short of income or you’re running short of money, let’s say, and the property needs to be improved, you are looking at yourself and saying, “I’m not sure how I’m going to pull this thing off,” which may cause you to have to sell a property or whatever.
What would happen if I took on you as a joint venture partner? You come in with cash, I give you part of the ownership, I retain the remainder of the ownership. I would even potentially manage the property or we could share the management decisions, but all of a sudden we’ve got a joint venture and I now have access to the cash that you brought in to upgrade the property.
Marcia Edwards: I think there are great advantages. You also need to look at the structure of the venture, the joint venture, the way it’s structured as if it’s falling, coming undone. I think the partnerships you look at assuming the best and all will go well, but life happens, people die, divorces happen, other types of partnerships unbundle. So you’ve got to look at that scenario too. But I would also suggest you make sure that you’re getting an equitable return on your investment, so to speak.
Are you putting more than what the partner’s putting in, or as a partner putting more than you are in? And really make sure it’s equitable out of the gate.
Bob Nelson: It absolutely has to be fair. If it’s not fair, it’ll be discovered later and boy, you’ve got a sour partnership, and that’s worse than a bad marriage.
Marcia Edwards: That’s bad. The idea of a partnership is something that you need to look at as a long-term commitment in a financial way, and that long-term commitment you’ve got to look at the resources you have, the resources they have. Are there still gaps? Would you welcome more than one other party into a joint venture, Bob?
Bob Nelson: Yes, bring in as many as you want, but of course, every time you add another individual, you’re adding one more set of potential problems later. Now, it’s interesting because let’s assume that we’ve decided to form a joint venture. I bring in the property, you bring in the cash. Later, you take the property, I take the cash, that may be a cash-free distribution out of a joint venture.
Marcia Edwards: Well, a quick twist at the 11th hour.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.
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