Real estate investing is a very rewarding venture, but can be difficult to fund. Joint Venture financing is great tool to fund real estate purchases and renovation projects. Below are some of the questions that many real estate investors ask about Joint Venture Financing.

1. What are the differences between joint venture financing and a conventional loan?

Joint ventures have a few distinct advantages over traditional commercial property loans.

First of all, having a JV financier invested in the real estate venture makes them more likely to leverage their expertise and ongoing support.

The structure of a joint venture alliance, especially one that’s formed as an LLC, allows for sharp limits on liability between the two parties in case the alliance is ultimately liquidated.

2. How do I qualify for Joint Venture Financing?

Unlike bank loans that require good credit or an income requirement, many JV lenders are flexible with their approval guidelines. Though JV lenders have different criteria, many JV lenders weigh their approvals on the strength of your deal, your experience, and whether your deal has the potential to provide them with the rate of return they’re looking for.

Since most JV lenders only fund up to 80% or 90% loan-to-value for acquisitions and loan-to-costs for real estate developments, these lenders prefer investors that have their own funds to put into their deal.

3. What do JV Financiers look for when evaluating a deal?

Generally, many capital providers look for a distinct list of unique criteria when deciding whether to enter a joint partnership or not. These include:

  • A record of success with previous real estate ventures
  • Enough cash on the real estate investor side of the deal to make the joint partnership equitable
  • Project sizes of $10 million or more; some jv lenders have smaller minimums ($1 million)
  • Knowledge of property management or project management
 

4. What types of deals do real estate JV Financiers look for?

 

Joint venture lenders fund a different variety of real estate ventures. The following is a general list of the types of deals most joint venture lenders fund:

  • Commercial real estate acquisitions
  • Residential and commercial real estate developments
  • Residential portfolio purchases
  • Real estate note purchases
  • Condo conversions
  • Hotel renovation projects
 

5. How do I present my deal to a JV Financier?

You only have one chance to make a first impression and most JV lenders only give you one opportunity to convince them to work with you. You not only have to sell yourself but also sell your deal. If you find a JV lender that you’d like to work with, the first thing to do is prepare a thorough and well thought out business proposal. JV lenders expect different types of information, depending on whether your deal is an acquisition or a development.

If you’re funding a development project, most JV lenders look for the following information:

  • An executive summary (including a description of your project, a synopsis of your marketing plan, number of pre-sales, and information about your exit strategy)
  • Your exit strategy
  • Marketing plan for acquiring pre-sales and post-sales
  • Your resume
  • Project timeline
  • Project budget
  • ROI analysis (a thorough analysis of the return on investment you will offer the investor, including hard numbers and detailed explanations
  • Your goals & objectives

When considering the funding of a real estate acquisition, most jv lenders will look for the following:

  • An executive summary, including your exit strategy and resume
  • Breakdown of your use of funds
  • A recent appraisal of the property (30 days or less)

6. Where do I find a real estate joint venture financier?

There are several ways to locate a real estate joint venture partner to work with. The best way to meet a JV partner is in person since you not only have to sell you deal but you also have to sell yourself. The best places to meet JV partners are with real estate and business network meeting and meet-ups. You can locate an event in your area with Meetup.com, Facebook (in real estate groups and under the tab labeled “events”), or LinkedIn. You can also do a Google search for real estate and business networking events in your area.

If social events are not your thing, another option would be to find a jv partner online. The best way to do this is with social media platforms. Join real estate investment groups on Facebook and LinkedIn. Connect with investors that are actively funding your type of deal. You should also connect with other real estate investors. They may know someone that is actively funding real estate purchases and/or development projects.

Conclusion

If you are considering working with a joint venture investor, it’s always a good idea to hire a professional team. This includes a corporate attorney to draw up your joint venture contract, an accountant and a financial adviser to ensure the joint venture meets your personal and business goals.

Are you forming a joint venture and not sure where to start? Call or email us today for a complimentary phone consultation.