Real estate joint ventures can work in a number of different ways. They can take the form of an informal handshake agreement between two friends (a structure that we do NOT recommend), they can be a written agreement between two investment partners, or they can be an agreement between a property investor and a lender.
Here at ZINC Financial, we’ve created a new joint venture program that allows experienced house flippers to enter into joint ventures directly with ZINC. Under these agreements, the house flipper oversees the entire flip. They have the freedom to choose their own investment property, complete the renovations they think best, and manage the ultimate sale of the home. ZINC’s contribution is fronting the entirety of the purchase and flipping costs.
For house flippers, this means the opportunity to flip more houses and earn better returns without worrying about multiple house flipping loans or the risks of putting their own capital on the line. For investors who have a proven track record of success, a joint venture such as this can be extremely cost-effective and help streamline the flipping process.
How to Get Started With a Joint Venture for Real Estate
The first step of any joint venture is putting together a contract that is beneficial to both parties. (This is why we don’t recommend handshake agreement between friends.) In a joint venture, you need to make it clear up front which responsibilities fall on which parties, what the ultimate breakdown of profits will be, and what will happen if the project needs to be terminated for any reason.
The most important choice when entering into a joint venture is deciding who to partner with. By partnering with an experienced lender, you can help ensure that your funding is secure, that all of the legalities of the agreement will be handled meticulously and promptly, and that your contributions will be treated with respect and professionalism.