3 Ways Joint Ventures Give You An Edge
There is a problem that plagues the real estate investment community. And that problem is a lack of creativity when it comes to structuring deals.
Ask people how to invest in real estate and the majority of people believe we only have 2 options:
“You could manage the asset yourself. OR you could partner with an operator and invest passively in their deals.”
Smart investors understand the power of joint ventures and structuring deals creatively. When you find an operator you trust, ask them if they would consider a joint venture. The benefits are plentiful. Here are 3 that might be of interest:
- 1) Creative Deal Structuring: You can structure your partnership in a number of ways. If you are interested in cash flow, you could build in a preferred return. If you’re interested in more upside you could structure the deal with more equity for you. The great thing about joint ventures is that they are highly flexible. Once you have an operator you trust and an asset you believe in, it’s pretty easy to adjust the structure to meet your investment goals.
- 2) Control and Authority: Most syndications bring in a lot of investors. If you have 30 or 40 investors in a syndication, there are simply too many people to have an aligned strategy. The operator might make decisions you don’t agree with. But when you joint venture with an operator, you can negotiate voting rights and the authority to make decisions. Those decisions can drastically improve your returns.
- 3) Generational Wealth: Real estate is such a powerful tool for longterm wealth. There is low volatility compared to hedge funds, angel investing, etc. It is not uncommon for some families to acquire a great property and hold it for 20 or 30 years. When you partner with an operator that shares your longterm vision, it means you can leverage things like 1031 exchanges, longer hold periods (if you choose) and a strategy that will benefit future generations of your family.
So the next time you’re looking to place capital, consider a structure that gets you excited. Consider a partnership that allows for the level of control and involvement that suits you best.