The three main reasons for entering a joint venture in real estate development. It`s pretty straight, if you understand the engine of the joint ventures. When it comes to launching and finalizing your development, it`s incredibly important that you can trust and hear from your joint venture partner. It is also important when it comes to apportioning responsibility. Two friends with an equal share can be happy to share the responsibility, while many investors, without prior transactions, want a structure that allows them to limit their liabilities. In the context of a real estate joint venture, each member is responsible for the profits and losses associated with the joint venture. However, this responsibility extends only to the project for which the joint venture was created. In addition, the joint venture is separate from the other business interests of the members. Once the building is developed, the discourse on exit strategies comes into play, which means you need to think about how to release the value of the asset. For a simple partnership, it`s probably quite simple, because each party pays its share of taxes on all profits and moves on to the next project. However, for a limited company or LLP, you may need to consider selling your share of the company, including all the legal arrangements necessary to facilitate this. Although these are the most common situations, you should always have a joint venture agreement if you are doing a real estate development with two or more parties.
Isn`t it a frustrating feeling to find the perfect development opportunity and then discover that it is not financially feasible? Once you have agreed on the principle of working with someone and creating a joint venture, the enterprise agreement will become a critical document that you should spend some time getting correct. All parties must be 100% aware of their role, responsibilities and rights within the joint venture. Thus, the owners and developers are teaming up for a joint venture project to develop the land for the benefit of both. In order to avoid probable disputes, misunderstandings between them and the completion of the project, they conclude a joint enterprise agreement clearly specifying the terms of the transaction.