JV financing

9 Replies

%Hello from a newbie investor. I have a question regarding JV financing. I notice on some JV financing they say 100%. There is an old saying when something is too good to be true it's not. Would you still need put some money down for the deal? Can someone please help on what you would have to do in a JV deal for them to finance the deal?

Hi @Jamal White - what you're getting with a JV structure is a partner, not just a lender - so you're giving up equity ownership in the deal. A typical structure I've seen (and used) looks like this: As the General Partner, I might bring no cash to the deal, but I sign for the bank loan or Hard Money first mortgage. My JV partner would bring all the equity needed for the transaction, and earn an 8% preferred return, then we split any upside 50/50

Example: We buy a house for $200k, and put $50 of work into it. JV partner brings $100k equity, I sign for a $150k bank loan. Lets say we sell the property for $350k, net of all expenses. The first $150k goes back to the bank, then the JV partner gets $108k, then we split the remaining profit.

Go into these things with your eyes wide open (which it sounds like you are)...if you think about partnerships, everyone should bring something to the table. So if you're a novice investor, but have contracting experience, maybe that's how you get into the deal. But if you have no cash and no relevant experience, why are they willing to do the deal? Be real careful of the 100% funding scams out there - if you have someone offering you terms like that, but they're asking for all sorts of fees upfront - run!

Good luck!

Originally posted by @Jamal White :
%Hello from a newbie investor. I have a question regarding JV financing. I notice on some JV financing they say 100%. There is an old saying when something is too good to be true it's not. Would you still need put some money down for the deal? Can someone please help on what you would have to do in a JV deal for them to finance the deal?

I think you meant "when something it's too good to be true, then it probably is" :)

Jamal, I don't think it's too good to be true. JV partners bring a lot to the table. They bring their knowledge and experience, which is worth a lot more than financing for a deal. JV partners have worked a lot of deals to get to the point where they can get 50% share without putting any of their money.

If you are looking to get JV financing, you have to ask yourself what do you bring to the table? What value do you add to the deal? Are you bringing 50% value to the deal to get 50% profits?

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@Jamal White

@Sharad M.

@Tom Meade

I have done hundreds of these I call them "Equity Share" and I write the Equity Share in the promissory note... Much like institutional banks do when they make large participation loans. I just brought it to the beginning RE investors. Not really complicated.. We charge a rate which is usually 7 to 10% and then in the Note we call for an equity participation based on net proceeds from the sale. Easy peasy no big lawyer fees all simple to grasp.. I did at least 400 of them over the last 5 years with all sorts of investors.

@Sharad M.

Depends on the deal.. I did one in Oregon a few years back were I lent 225k and took a 50% equity participation. they sold the property for 800k so we netted 575k and we got our 10% plus 50% of the 575k so bout 300k profit on a 225k loan in less than a year. Now they are not all that good of course.. But for the borrower no one would lend him a dime we stepped up and basically became his partner. He owned the dirt we had the mortgage and no one knew what we made since we were a bene not a owner. On my little deals In the mid west we will lend 30 to 50k and take 25% of the ups, and only do it with those I have vetted. No newbies wannabes or crooks.

@Sharad M.

More money Is lost by investor worrying about paying to much and not doing the deal at all I really never could fathom that.. And I absolutely do not do bizz with those that shop me and will say hey I can get funds for 1/2% less.. For those I say well go ahead but if your looking for a long term lender partner that will go the extra mile. and be Johnny at the rate hole.. then go ahead. For me I have carved my niche by being there for my borrowers.. I fund deals in 2 to 3 days period. Since I am the final say , and the underwriter and I am not one for draggin things out.. Those that end up being my clients stay with me because in essence I am there money partner even though we do it through the loan process....

@Sharad M.

In fact there was A Chicago BPer who made a post on Friday needing 100k on Monday.. I contacted them SAt. got them a proof of funds letter Sunday and was prepare to fund on Monday.. They lost the property to a higher bidder but I would have made that deal and funded NO problem. And my fee as I told them is higher than most but I am good at what I do and NO BS if I say I am going to do it its done period. YOu pay for that service.. Not outrageously so but a little more than going HML who has to take you through all the hoops and adhere to the PPM criertia or sell your loan to an investor etc etc.

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