Real Estate Investing Basics

A Tale of Two Real Estate Joint Ventures: Success vs. Failure

Expertise: Personal Development, Real Estate Investing Basics, Business Management, Mobile Homes, Real Estate News & Commentary, Landlording & Rental Properties, Mortgages & Creative Financing, Real Estate Marketing
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real estate joint venture Hurricane Katrina

The old saying goes “two heads are better than one.”  Out of all the real estate transactions I have been a part of, some of my favorite deals were the JV deals I have done with a partner.  Working a real estate investing deal with someone else can greatly increase profits, productivity and results.  

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I have two joint venturing stories to share with you today.  One story is of a great success that created laughs, profits and comradery.  The other story is of a simple deal that let a two decade long friendship burnout.

Success in Partnering

The year was 2004.  The patriots just defeated the Panthers for the first of consecutive Super Bowl victories and I had just met another young investor in town.  We met at a local REIA meeting and we quickly discovered that we shared very similar ambitions and drive; the best part of all was that he was nothing like me.  He was crass, rude, analytical, introverted and he knew about developing land, impact regulations, and he could rebuild or fix anything in or under a house.  I on the other hand had real estate investing knowledge, experience, and knew how to find and structure amazing mobile home deals.

We sat down and discussed how to make $1,000,000 in the next 30 days.  I love having these conversations even if we seem to be reaching for the stars.  Over the next 3 years we created several mobile home/land transactions from scratch.  We were both doing things we loved and were proficient in doing.  We bought undervalued land using creative terms, he made it ready for residential use and I moved very beautiful, very inexpensive manufacture homes in place.  We sold the home and land packages with seller financing until a point when we were refinanced out, making a sizable profit for the amount of time and effort applied.

A Real Estate Partnership Gone Awry

Halfway through this fun and profitable joint venturing experience, a childhood friend and I came up with a plan to purchase and fast turn homes destroyed by hurricane Katrina.  Yes, this is one of those stories!  Partly sparked by the TV hit “Flip This House” and the hype of real estate and flipping homes we rushed to get our investing game plan together.  We were best friends and I let friendship cloud my vision to the great obvious flaw in our partnership.  My friend knew next-to-nothing at the time about real estate investing or rehabbing gutted houses.  My tasks in the transactions were to handle a majority of the financing, book keeping, and my friend was to handle the supervision and handling of repairs, contractors, permits and deadlines.

We got along great, trusted each other completely and went so far into debt it hurt.  We purchased our first Katrina home using hard money; before we were even done fixing the first one to be ready for market the second and third homes were already bought — with hard money of course.  Living over 900 miles away from Mississippi made it challenging to view repairs, pull permits and hire contractors.

Missing materials, natural disasters, insurance underwriter, alcoholic contractors, fires, power problems, and permitting issues all caused delays to mount up and expenses to multiply every month. The mounting frustration, animosity and disdain between my partner and I caused a breakdown in communication and soon the deals were doomed.  I ended up losing my best friend, credit, respect and a ton of capital.

Lessons Learned

It is import to remember, before embarking on any new venture, to get advice about the destination ahead and to set realistic goals with an educated and trusted mentor.  You would not try to travel to somewhere you have never been without detailed directions or a guide.  Watching a few shows on TLC does not make anyone an expert in construction or management, and being naive won’t stop the bills from piling up.  Things do not always happen like you plan, but if they do turn sour it would be nice to have a partner that is just as invested in the transaction, its success and failure, as yourself.

Joint venturing can be a great asset when it multiplies your efforts.  Try doing a single deal, make a profit, and then do another.  Test the joint venturing waters before you dive in without a tank.  Partnering with an individual that has the same or more drive, successful track record and passion, yet brings a knowledgeable skill set different than yours, to a deal, can make for a fruitful partnership.

–          J. Fed

Photo: shawnzlea

Investing since 2002, John started in real estate accidentally with a four-bedroom mobile home inside of a pre-existing mobile home park. Over the next 11 months, John added 10 more mobile homes to...
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    [email protected]
    Replied about 10 years ago
    Great article J-Fed! I’ve done plenty of JV’s and will continue to do them. I find it best to do them in singles or double deals at a time. This way, the relationships are shorter and less committed from each. I don’t think I could ever enter into a long term JV with anyone (especially with family) knowing that we all change and it would make it worse when a lot of money is involved. I like your story with the land guy. I think that’s a great partnership and hopefully it last long.
    Mark S.
    Replied about 10 years ago
    Thanks for sharing these stories, John. I find that learning from both my failures and those of others is actually much more powerful than anything else.
    Mark S.
    Replied about 10 years ago
    Thanks for sharing these stories, John. I find that learning from both my failures and those of others is actually much more powerful than anything else. Reply Report comment
    Mark S.
    Replied about 10 years ago
    Thanks for sharing these stories, John. I find that learning from both my failures and those of others is actually much more powerful than anything else.
    Rohit Yadav
    Replied about 6 years ago
    Very nice post. Real estate is good option for investment. If you are thinking about investing Real Estate in Gurgaon than go for Emaar mgf palm drive.