Joint Venture Investment Example
Min Capital Needed: £55,500
Nature of Investment : Buy-to-sell or Hold and Refinance
Holding Period: 4-6 month cycles
ROI: 12 to 18% cash / gearing, capital uplift on sale & rental income
Eager to invest your money in property, but struggling to afford the substantial start-up costs? A joint venture property investment could be the profitable opportunity you’ve been searching for.
When you choose to make a joint venture property purchase, all the profits, losses and costs are shared between the involved participants, making this type of investment ideal for a range of investors.
By sharing the venture between two or more parties with varying expertise, knowledge and skillsets, even participants with limited experience in this industry can succeed. Regardless of whether you’re an inexperienced investor or one with a specific skillset, joint venture investments can create a viable route for many into property investment.
What is a joint venture investment?
As indicated by the word ‘joint’, a joint venture investment is where two or more parties pool their money or other resources together to achieve a common business goal. With regards to property investment, this type of temporary business arrangement would typically involve an investor and a management company but can involve any number of different companies.
What do joint venture investors look like?
While joint venture property deals are commonly made by investors and property management companies, they can also be used to form mutually-beneficial relationships between developers, builders, architects, and finance houses, to identify just a few interested parties. As a result, joint venture investors can take many forms and these profitable partnerships can be built between practically any legal structure.
What are the benefits of undertaking a joint venture?
Sharing the costs of a joint venture between two or three parties is an economic approach to any property investment which is why joint venture propositions can be so popular. Typical property costs include not only the purchase price of the property, but also any advertising expenses, as well as the labour and material costs if the property requires updating or renovation.
Many joint venture agreements (JVAs) are undertaken by two or more parties with separate skillsets or expertise. With their combined experience, they are able to divide the responsibilities of renting out or renovating the completed property according to their specified areas of knowledge. For example, one investor might be a qualified lettings agency while the other has vast construction experience.
However, before any partnership can be cemented, it’s important to legally set out the obligations and requirements of each party. Everything from the day-to-day operations to the financial contributions and greater responsibilities should be clearly set out in the JVA to avoid disagreements further down the line.
Similar to the sharing of costs and profits, joint ventures can also include the pooling of resources. By way of illustrating, one investor might supply the necessary building materials while the other provides the labour. Combined, these two investors will be able to complete more of the project on their own, helping to save external costs and increase their overall profit.
What are the different types of joint venture property investment?
While joint venture investments come in all shapes and sizes, there are two broad categories that any JVA tends to fall into profit share and fixed interest.
Profit share joint venture example
A profit share JVA involves simply splitting the profits amongst the investors in a pre-agreed manner once the project has been completed.
For example, Mr A might own a construction business, while Mrs B wants to fund the venture. Mrs B pays for the property while Mr A uses his skills and expertise to manage and renovate the property. Prior to taking on the project, they agree to split the profits 50/50 between them once the project is finished, thereby sharing the profits.
Fixed interest joint venture example
Fixed interest JVA’s, on the other hand, involve paying investors a fixed rate of interest upon project completion. Instead of a percentage split of the profits, a fixed interest JVA provides gives the investor a certain percentage of fixed interest that is agreed at the outset.
Using the same example as above, Mr A still sources and renovates the property, while Mrs B pays for everything. However, instead of splitting the profits between them as a percentage split, they agree that Mr A will give Mrs B 15% annual rate of interest on her money.
In the event that the property renovation takes one year to complete, once sold with a profit, Mrs B will receive her investment back on top of the pre-agreed 15% fixed rate of interest, while Mr A receives the gross profits minus the interest paid to Mrs B. The best type of joint venture property investment will therefore vary to suit the requirements or preferences of the investors.
While joint ventures can take many forms, as explained above, we offer our investors a variety of options here at Mistoria Group.
By committing to a joint venture partnership with Mistoria Group, investors can purchase either a residential, HMO, or buy-to-let property for BMV (Below Market Value) in joint names.
Once the property has been bought, both parties can fund the renovation and refurbishment costs resulting in a high-value, lower cost investment property. Not only will the value of the property have been significantly raised, but the property will also be fully market-ready within just 3-5 months.
Similar to merchant investment, this option offers both the investor and Mistoria the opportunity to purchase, renovate and either sell or hold multiple properties on a regular basis. By reducing the cycle times of purchasing, renovating, and selling on properties you can maximise your returns quickly and in a short space of time.
As this type of investment may be subject to tax implications, you are assigned a personal investment manager to help you manage your projects, while ensuring you receive the maximum benefits from your investment strategy. Both the investors and Mistoria are typically responsible for refinancing or finding an end buyer and to realise the capital uplift at the time of sale.
Offering quick and healthy returns of up to an impressive 18%, why not discover your next highly-profitable property venture with Mistoria Group by your side? Our team is comprised of expert accountants, maintenance managers and letting agents to help guide you every step of the way.
On the lookout for high-yield investment opportunities across the North West? We are constantly discovering unmissable new properties that would make fantastic investment opportunities. Get in touch today!
If you’d like more detailed information regarding our joint venture opportunities, please email us at firstname.lastname@example.org or call us on 0800 500 3015 to speak to one of our experienced team members.
Alternatively, if now isn’t a good time, you can always get in touch with our head office by filling out our online contact form.
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