3 Times When Real Estate Joint Ventures are Ideal

There are literally countless scenarios in which it makes sense for house flippers to consider real estate joint ventures. Here are just three scenarios that show the possibilities of joint venture for real estate.

Scenario 1: Dipping Your Toes

You’ve been toying with the idea of flipping houses for quite a while. You’re getting ready to retire from your desk job, and you’ve always had an interest in real estate and construction. You have a few friends who have found a lot of success flipping houses, but you’ve never done it yourself. Taking on the burden of an entire house flip on your own sounds a bit overwhelming, and you’re worried about making beginner mistakes. But you’re about to start earning a generous pension, and you have a large savings account burning a hole in your pocket.

For this person, a great way to enter into the house flipping market for the first time would be a joint venture. They could partner up with one of their already successful house flipping buddies and create an agreement wherein they provide a portion of the capital, but the friend has the reins on the actual flipping process.

If you can find someone that you really trust and can agree to equitable terms, this type of joint venture is a great way to get your feet wet and have a chance to learn about house flipping in a hands-on way while also earning revenue.

Scenario 2: A Sudden Lack of Cash Flow

You’ve been successfully flipping houses for years. It’s your passion, and you’ve gotten into the habit of flipping 3-5 properties every 12 months. Usually you take out residential rehab loans to cover a portion of each project, but now something has happened in your life that has seriously limited your ability to put up the remaining portion of the costs. Maybe you just sent your twin daughters to college. Or maybe you’ve incurred a large, sudden medical expense. Or perhaps you decided to invest in a second home for your family. Whatever the reason, your cash flow is at a standstill.

In this case, a joint venture can be the perfect solution for finding cash flow without seriously upgrading your risk level. When working with experienced house flipper, private lenders like ZINC Financial will enter into joint ventures wherein ZINC provides the entirety of the purchase and renovation funding, and the house flipper oversees the actual flip. When the house is sold, the flipper and ZINC equitably split the resultant revenues. This kind of set up is ideal for someone who has a lot of experience successfully flipping houses but needs a significant source of funding.

Scenario 3: The More the Merrier

You have house flipping down to a perfect science. You’ve cultivated an amazing team of contractors, realtors, interior designers, and accountants, and you have a trusted source of house flipping loans. As a result, you’re constantly flipping three properties at the same time, all with great success. Now you find yourself with the time and energy to flip more properties but insufficient capital to get more projects started.

In this case, a joint venture is an ideal way to extend your capital and expand your reach. With financing being provided by a trusted partner, you have more freedom to put your own capital toward other investments, whether they be more house flips or other types of ventures.

Joint ventures can take a wide variety of forms. They can be agreements between house flipping partners or between a house flipper and a private lender. Whatever form your agreement takes, be sure to write out a formal agreement and have a lawyer look it over before you sign anything. Take care to include clauses on each party’s responsibilities, the ultimate division of profits, and what will happen if the contract needs to be terminated for any reason. Better safe than sorry!