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How does Joint Venture Property Investing work?

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Joint Venture Property Investing is quickly becoming the modern way to invest in property as it allows cash investors that perhaps lack knowledge, experience or more importantly time, to utilize the know how of experienced property investors. 

Typically a joint venture is when one party sources and puts the investment together, including arranging the institutional funds such as bridging and property development loan, and the other party, known as the equity partner, puts in the cash part with both secured in bricks and mortar. For example, let's say the property investor sources a 3 bed mid-terrace for 100,000 which can be re-sold for 150,000 upon refurbishment. A bridging lender will usually lend up to 70% to 75% of the initial purchase meaning an equity contribution is required for the additional part:

* 100,000 Purchase Price

* 70% Bridging Loan LTV = 75,000

* Cash Contribution = 25,000 + Stamp, legals, finders fee, bridging interest, searches, and landlord registry

Upon re-selling the property after refurbishment, for the purpose of this post, let's say the profit remaining after selling costs was 40 k. Both the property investor and the equity partner would split the profit 50/50 meaning the equity partner receives 20 k. Based on the total capital invested of 33,000, means the equity partner earned an ROI of 60.6% within as little as 4-6 months. Hence why joint venturing with experienced property investors is really coming into its own as it allows leveraging the skills and experience of a property investor such as Estateducation with the funds of an equity partner to produce property profits that otherwise would not be achieved by either party without the other.

Estateducation recently completed a joint venture with an equity partner on a 3 bed mid-terrace in Norwich which we converted into a 5 bed student HMO producing a rental yield of 24,000 per annum. We rented the property ourselves (to save on lettings agents fees) and sold the property within 7 days of it being on the market for 240,000 as it represented a 10% yield deal to a prospective buyer. We have pasted below the financials for that joint venture which shows the ROI as 94.95% which we achieved within 3-4 months as we successfully negotiated a works access on exchange thus meaning by the time we completed on the purchase we had already completed the refurbishment. Yet another example of why utilizing the know-how of an experienced property investor is worthwhile. 

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When you compare the returns on offer with joint venturing in comparison to that of other investments, it's easy to understand why we're witnessing more and more joint ventures happening. Let's take a look at other alternative investments: 

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As you can see above, there's not a lot of alternatives at the moment which match potential returns on offer with Joint Venture Property Investing. A very important point to factor in as well is that in the case of Buy to Lets you're either having to pay huge expenses to have those investments managed or you're doing it yourself and carrying the stress and worry of hoping it will bear fruits. When joint venturing with Estateducation those stresses and worries dont apply because our ‘hybrid joint venture model’ manages the lifecycle of the venture from start to finish, leaving you to concentrate on more important matters such as work and family life.  

Estateducation’s ‘hybrid joint venture model’ has a legal framework that provides the most tax-efficient way whilst also not entwining each parties personal and business finances too closely together. We source the investment, progresses the purchase to completion, manage the refurbishment, interior design and furnishings and then sell, let or manage the properties with the profits being split 50/50 with the equity partner. Estateducation isn’t just a Property Investor, Developer and Sourcer, we also teach fellow property investors in how to invest in property, what deals to look for, how to crunch the numbers and how to achieve successful returns on investment. In addition, we run mentor workshops, build and manage property portfolios, and run local property networking events. 

If you're interested in finding out more about joint venturing and learning about some of our current ventures please get in touch via our Website Contact page http://www.estateducation.co.uk/contact-us/ 

Thanks for reading.

The Estateducation Team. 

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