To JV or not to JV what is the answer?

 Joint venture partnerships are common within my investment group. Many investors know the others and combine forces (money/time/knowledge) and purchase  properties for a particular end result. Many are successful and others end up real bad. even causing friendships to end What is the cause of these two quite different outcomes? Up front planning! Identify/agree and write down the plan and structure the joint partnership prior to jumping into it with a wish and a prayer-

First - identify the strengths of your potential partners. Basically - what are they bringing to the table? That strength should fill a hole in your project that will bring it success. That strength can be providing funds to manpower but, whatever it is, it should be clearly defined in the beginning- and put in writing. A I do this and you do that list...Put a dollar or percentage to each duty. ie if you bring just the money you get X percent. sounds easy- but what there is alot not stated- how long? when do they get paid? what if more money is needed? Discuss and agree on these details first.

Second-before the property is identified, what is the goal? Is it long term hold, a quick flip, or extensive rehab? Make sure everyone is on the same page before you start spending dollars. Once you have agreement, what happens if you have to go to plan B? If you were planning to make 20% on a quick rehab and the property has been on market for 8 months, do you drop the price and move on or does it turn into a rental? Discuss and agree on back up plans in the beginning. Who manages the rehab, the financials, the property management?

Third- How do you divide the spoils? A fifty/fifty deal always sounds easy and fair in the beginning but not at the end.. Make provisions for it prior to it becoming a problem. If a partner had to pull more weight than originally planned, is their compensation for that? 

Finally- do the partners play well with others? Sometimes, people are just not team players. It is tough on the partnership when a partner looks after themselves rather than the partnership interests.

Sounds like a dont like partnerships but I really do! Just the structured ones. If you have the i's dotted and the t's crossed, a JV is fun, profitable and rewarding. It spreads the risk, motivates, and can get deals done that possibly could not be done singularly.