How To Avoid Bad Joint Ventures?
In this article, I answer Alex’s questions on ways to avoid bad property joint ventures alongside my brother, Russel Leeds as we share what made our partnership a success.
Q1: What was the biggest shock issue you had to run in when going into a JV development anything? to safeguard us against?
Always get solicited on your contracts.
Make sure that you have a contract even if you're dealing with family or buddies because, honestly people can get so greedy when they see money on the table.
When the property starts going up, people just get greedy and it's so sad because we've never been like that as me and my brother weren't raised that way.
We of course like money but we’re usually straightforward with our dealings.
You know when someone dies and they've got money, their kids often start fighting and squabbling over them and it's like the more money the more they'll squabble.
If it was 50 grand they'll squabble over the 50 grand but if it's 5 million then it's like they're going to fight for every single penny and it’s just how people get sometimes and therefore when you've made a lot of money, people will always be after it.
To us it’s no big deal as we've been making money for years and years and it's no big deal.
I made a couple hundred grand and that's it as it doesn't affect our everyday life because we both pay ourselves a salary from our property company.
We've got several businesses that we set up before we even partnered together but the thing is it's just a game and it's like monopoly for us but for some people it's like oh this is gonna change my life and people get really greedy hence you've got to set up a really clear agreement that’s not just for legalities but also for clarification purposes.
It took around three months before partnering up as we went through everything and wrote down things such as what happens if I want to buy my partner out or they want to buy me out?
Don’t wait to discuss these things later on as they’ll negatively impact your relationship due to unexpected demands over time.
Q2: We're doing a no money down development backed by an investor and so we will complete the development with no money is that great?
If you're not putting money in yourself, it's much less risky as the only risk you've got if you're not putting the money in is you've got the risk of your reputation.
If you're putting the money in that's when it's all right and we've put a lot of money into deals as we've had great joint venture partners that were good and we've helped the odd terrible ones.
The worst thing that can happen is you lose a friend and a reputation which is bad of course but it’s a good deal.
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