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25 Feb

Joint Venture Investment: How can it be used to buy commercial property?

Joint venture investment: what is it?

If you are considering purchasing or developing a commercial property, you might want to consider a joint venture investment.

Joint venture investments are a popular means of funding, because they benefit all parties concerned, maximising available resources while spreading the risk. It is nonetheless wise to consider the ins and outs of a commercial joint venture before making the investment.

Investments using a Joint Venture

A commercial joint venture can include several stakeholders, who pool their resources in order to collaboratively manage a property development project. The contributions that stakeholders bring to the table can be anything from raw capital, a specialist skill set or other resources.

Commercial joint venture stakeholders may be:

  1. Investors
  2. Landowners
  3. Property developers
  4. Funders

Joint venture investment: different types

Before entering into a joint venture investment on commercial property, first consider the most common types of property venture and decide on the one that best suits your means, abilities and situation.

Profit share joint ventures involve several parties funding a commercial development together. When the project is complete, the profit is then divided into shares which are split between all of the parties involved according to the amounts agreed beforehand.

By contrast a fixed interest joint venture commonly involves parties who bring different resources to the venture. For instance, one party may fund the project and another may use their skills to design, plan, develop or manage it.

Because the means of contribution in a fixed interest joint venture are more varied, there is more scope for those who want to make a commercial venture, but lack the capital necessary for a profit share.

Joint venture investment: is it right for me?

Joint venture investments are more suited to certain developments than others. If your project is small, the cost of drafting a complicated joint venture with a solicitor makes the profit margin small or nonexistent. In such cases, it just isn’t worth it.

Equally a very large and complex development may be too difficult to manage without a very large group of investors. It will also require a lot of expensive legal negotiation to ensure that all parties are satisfied that their rights and funds are protected.

Joint venture investment: what to do beforehand

Before embarking upon a joint venture investment in commercial property, there are several steps that you should take in order to safeguard your interests.

  1. Decide whether you want to be part of a profit share or fixed interest joint venture investment
  2. Make sure that you are happy to work with all parties concerned
  3. Clarify the roles and responsibilities of each party within the project
  4. Agree on profit shares and how they will be distributed once the project is complete
  5. Secure the venture with a contract

Once you and all the other investors have agreed on all of the above to your satisfaction, a solicitor then draws up a binding legal contract to ensure that everyone fulfils their obligations.

If you’re considering a joint venture investment and require any information or professional advice regarding commercial property, just give us a call and one of our talented team will be happy to help you.

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