If you have an eye for spotting great real estate investment deals but do not have the cash needed to purchase them, you could consider using a joint venture to help you accomplish your goal of making money on commercial real estate. Here are several things you will need to know to start a business like this.
What is a joint venture?
There are people that have absolutely no knowledge of the real estate market but have a lot of cash, and there are others that know the real estate market and have no cash. When these two types of individuals form a partnership together, they can each contribute what they have or are good at. When this happens, you have a joint venture.
A joint venture in real estate is simply an agreement between two or more people to do business together. While you may be the brains of the operation, the other person will provide the cash needed to purchase properties. The investor will not need to supply 100% of the costs of the properties you want to purchase, but he or she will usually supply the money needed for the down payments on the properties.
What type of business structure should you choose?
Purchasing commercial real estate can be a great way to earn money; however, there are risks involved with it too. To protect yourself and your partner, you will need to set up the business in a way that offers limited liability. Limited liability offers protection to your personal belongings, which is a necessity when forming a joint venture.
A typical and good structure to use for a real estate business is a limited liability company (LLC). LLCs are easy to set up, and they offer the type of protection you and your partner will need.
What legal work is needed to do this?
The first step in forming a joint venture is locating an investor willing to partner with you. Once you do this, you can work on creating the LLC agreement, which you can hire a commercial real estate lawyer to do.
This agreement will state the arrangement and guidelines of the partnership. It will include the names of the partners and their duties in the LLC. It will also contain details regarding the way profits will be divided among the partners. Once this agreement is in place, you can start looking for real estate to buy.
If you are interested in doing this and would like to learn more about joint ventures, contact a commercial real estate lawyer in your area today.