Joint Venture Advice

[Manolo D.]

Hello BP, I would like to ask for opinion on the JV that I am about to post on Marketplace. This is my first draft, and would love a lender's input on this. Looking to accomplish 100% acquisition and 100% rehab joint venture with 50/50 split on profit. I threw in a couple of add-on values to "sweeten" the deal, I am not sure if its enough, or if I need to adjust the rates/splits. Thanks.

https://www.dropbox.com/s/oa0mfiwbgoud6on/Joint%20Venture%20Agreement.pdf?dl=0

[Eric M.]

First of all, I don't form new LLC's for a 1 property JV. It isn't necessary.

Second, I would personally not be comfortable with that agreement. This doc does a fine job of spelling out the responsibilities of each party. This doc will work fine in a JV that goes all according to plan. But that is not why you have JV agreements.

But IMO, the most important part of the doc is missing. That is what happens if either party does NOT fulfill their responsibilities. How are these issues rectified? Right now the only option is suing because no solutions are spelled out. So 1 guy is supposed to pull permits and the other guy pays within 7 days. But what if they don't? One guy is supposed to be in charge of rehab. Fine, but what if he packs up and leaves the project? What happens if it goes 100% over budget? All these things can and will happen eventually in JV's and those are the times you need an agreement to go by. But no remedies are spelled out in yours.