#047 - How to set up a JV correctly

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Manage episode 226686528 series 2176573
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Ray and Nigel discuss an often asked question - should I do a Joint Venture (JV) deal and if so how do I set it up correctly?

First of all - Yes you probably should do a JV because it is a great way to leverage other people's money and skills.

Secondly - get a JV wrong and it can be PAINFUL and COSTLY! So getting it right is super important.

This is our list based on our experience and knowledge. See the 10 points below.

You may have some other top tips - if you do then send them to us at https://www.raisingangelfinance.co.uk/contact/

Tell us about your JV experience - was it good? Or not so good??!!

These are our personal thoughts and not to be considered legal advice in any nature.
Points

  1. Have a professional experienced solicitor draw up the agreement
  2. Consider having a SPV- Special purpose vehicle ( separate company)
  3. Have a clear plan as well as a back up plan. ie. Flip and back up strategy is property is rented whilst trying to be sold…ie it is cash flowing
  4. Control – Who owns the property. We prefer our JV partner to own the property themselves. This way they are protected fully and we place a charge (or in England RX1) on the property in order that the property is not sold out underneath us even with a proper JV agreement
  5. Complete understanding of responsibilities of each party. You also need to spell out if both partners will be part of the decision-making process of reducing the house or property price. It is really helpful to include all contingencies and worse case scenarios.
  6. Obligations of each party.
  7. Financial: what equity each partner is responsible for
  8. Operations: who is running the day-to-day operations of the refurb and responsible for bookkeeping and record keeping
  9. Marketing/sales: who is responsible for marketing and selling the finished product
  10. Profit allocations- clear and simple ie I have seen many joint ventures be 50/50, but sometimes they are 40/60 or 30/70. It completely depends on the value the partners are bringing to the table
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