First Rental Property

Once you become an experienced real estate investor, you will have people approach you that want to invest in real estate with you.

Being a real estate investor with a clear track record of success means a lot.

It means that you have taken some calculated risk, invested in real estate and have succeeded.

One of the greatest assets that you will have as a seasoned real estate investor is your life experience as your investor.  There is nothing more valuable than ‘being in the trenches’.

Starting off investing in real estate can be an extremely intimidating experience for many new investors.

I have observed and spoken with many people who are interested in real estate investment.  I would say that the minority of these people actually end up pulling the trigger and investing in real estate.

Why is this the case?

I believe that only the minority of people end up investing, because it is this minority that has the courage or receives the proper guidance.

Success with real estate investment is all about surrounding yourself with people with experience investing in real estate.  You need to learn from others that have invested before or who are in the process of investing.

If someone has an interest in real estate and wants to begin investing, they are not going to magically learn everything they need to learn about real estate by hanging out with the same people in their lives.

They have to expand their horizons and start to network with people who are taking action with real estate investing.

Joint venturing is a reality especially for experienced real estate investors.

When an experienced real estate investor is speaking to potential joint venture parters, there are a series of common questions that always seem to be asked by these joint venture partners.

I will cover the first 4 question in this article.  I will also address how you should answer these questions when speaking to these joint venture partners.

1)  JV Partners will ask you, “Will the real estate market continue to go up?”

When you answer your potential joint venture partner, you tell them, “Absolutely!”
You as a real estate investor should have full confidence in the real estate market and you should believe that the market is going to continue to go up. (it always will). If you do not believe that the market is going to continue to go up, then you have no business in asking a joint venture partner for funds. Be confident in responding. Believe in the market and believe that it will continue to go up.

2) JV Partners will ask you, “What is the worst that can happen if I invest with you?”

When people have not invested in real estate, they are generally anxious and think that bad things will happen to them if they invest.

The worst thing that can happen is that your tenants will end up paying off the mortgage and your rental property will be free and clear of a mortgage in 25 years.

This is the worst that can happen, and this is what you tell your potential JV partner.

When they see that the worst case scenario, is not even a bad situation, they will start to see things differently and have more confidence in real estate and in you.

3) JV partners will ask, “Can I see the joint venture agreement?”

You should always use a joint venture agreement, no exceptions. If your potential JV partner asks to see the joint venture agreement, you say, “No”. And here is why…

You are not a lawyer and you do not understand legal jargon. The joint venture agreement is often times a 5 to 10 pages document of exactly that….legal jargon. Since you are not an expert in explaining these documents, you should not be doing it. This should be the job of your real estate lawyer. Good real estate lawyers deal with these documents every day and can explain them very easily and in plain English.

Advise your potential JV partner to meet with your real estate lawyer so that they can review the document together. You can even go ahead and book the appointment with your real estate lawyer for the two of them to sit down and go over the document.

Again, since you are not an expert in legal jargon, don’t even try to explain the document. If you try to explain the document and the legal jargon involved, you run the risk of making a mistake in interpreting the information in the document. This could cause a lot of confusion between you and your JV partner.

4) JV partners will ask, “Can I get a copy of the Joint Venture agreement so that I can show MY lawyer”

Your answer to this should be, “Absolutely. In fact, this is one of the terms of us doing business together. You need to get independent legal advice from your lawyer.”

Getting independent legal advice is always mandatory. If someone is not willing to get independent legal advice before entering into a Joint Venture Partnership, then don’t enter into the partnership with them.

Your real estate lawyer will have a copy of the joint venture agreement. As such, your real estate lawyer can send directly to your JV partner’s lawyer a copy of the joint venture agreement. Once the other lawyer has a chance to review this agreement, the other lawyer will consult with your JV partner and explain to them the details of the JV agreement.

In tomorrow’s article, I will cover the next 4 common questions that joint venture partners will ask.

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Part Two – The Eight Most Common Questions Joint Venture Partners Ask