Kate Babkova is the co-founder of Housetracker.ca and JVs for Profits, an organization that connects investors with joint venture partners.
Why are more investors looking at joint ventures for the property deals?
Joint venture simply means combining forces to overcome an obstacle that otherwise would be impossible or difficult to conquer. The best part about JVs is that they can be structured in many different ways. For instance, if you run into the common problem of financing, you would want to work with a partner who is able to provide financing while you deal with the hands-on work.
What are the benefits of JV investing?
Joint ventures help investors complete more deals and, most importantly, better deals. It’s like adding a “super power,” which could be a skill, knowledge, money or the ability to find great properties. No longer do you need to be the super expert in every area of investing, because you can combine to benefit all parties involved.
What makes an ideal JV partner?
This varies by the partner and the deal. The best way to determine what makes your ideal JV partner is to compose a list of qualities you would want in a partner, along with the qualities you’ll need to make your business successful.
Are JV investors more likely to encounter financing issues than solo investors?
In my experience, investors who encounter financing issues can actually resolve this by working with a JV partner who can qualify for financing and provide the initial investment capital. JVs typically will allow you to fund more deals and have fewer financing issues when done correctly.
Where do some JV investors get it wrong?
Finding a deal and then looking for JV partners is the most common mistake. To put it in perspective, let’s say you work with partners who qualify for financing and provide the initial investment capital. When you’ve spent time looking for a great deal and are excited about the potential returns but have no JV partner lined up, you end up needing the money. When you are needy, you are less likely to find your funding.
If conflict arises between JV partners, what is the best means of resolving it?
Having a strong joint-venture agreement prepared by an investor-focused real estate lawyer. This agreement outlines all the rules and expectations, and guide partners when a disagreement arises.
What is the key to success in a JV partnership?
I have to place emphasis on having the right fit between the partners. One of my favourite quotes from Warren Buffett sums it up perfectly: “You can’t make a good deal with a bad person.”
What tips would you give to first-time JV investors?
Put your focus towards building credibility, trust, networks and learning as much as possible. If it’s your first deal, give up the bigger portion to your partner in return for some JV experience.
If $1 million were to magically appear for your investment purposes, what would you do with it?
It would go towards expanding my current portfolio in some way and adding value to my existing properties. I can’t say exactly where I would put it; it wouldn’t be an overnight decision.
Cash flow or capital growth?
For me, it will always be cash flow and mortgage pay down. Capital growth is a nice cherry on top, but we all know that markets can go through ups and downs. Focusing on cash flow and long-term buy-and-hold strategies allows me to ride out market fluctuations while still enjoying cash flow and mortgage pay down.