Hey guys, it's Clint Coons here.
And in this video, I'm
going to share with you my best real estate joint venture strategy.
All right. Let's get started.
So here's the deal.
Real estate
joint ventures are becoming more popular right now because as people go out there
and they want to acquire real estate, they're realizing, hey, working
with banks, with interest rates are going up, it's making it more difficult.
And there are people that have cash on the sidelines.
So if you can find deals and you have the know how, let's say it's a rehab.
There are people out there that are willing to invest with you.
Now, the key is how do you approach those people
and set up the deal so it doesn't become a security,
but more importantly, it provides protections for all parties.
Now, there are various ways to create real estate joint ventures.
You can use a limited liability company, you can use a tenant.
And common agreement is another way to do it, or you can create a syndication.
Now I talk about many of these very strategies on my channel.
You can look up those videos.
In fact, I'm going to be considering creating some new ones in the future
on this particular topic because it's becoming so relevant right now.
However, in this video, I want to share with you my best strategy
that I think is something you should seriously consider
if you're getting involved with a real estate joint venture.
Because when you're going down that road, what are some of the common concerns
that people have? Well, here it is.
If I am a person that's going to go out there
and find real estate deals and possibly be the one in charge of the rehab,
and I want to work with another joint venture partner.
Do you want that individual being involved in the day to day business?
That can be a problem if you want to bring someone in
because they may be have a different idea of how this works.
And they really have no real estate investing experience.
So with you're
running real estate, personally, I wouldn't want someone involved with me.
I'd like to use their money.
Think of it like going to a bank.
How would you like it if the bank sat there and tried to make
rehab decisions on a particular property with you every step of the way?
Or you have to check with them
each time you wanted to change out a paint color or something like that.
Well, that's what can happen
when you get involved in a joint venture where it's set up possibly
through a limited liability company or a tenant in common relationship,
where the both tenants or both partners in the business
have decision making authority.
Now, it's good in certain contexts,
but a lot of times when you're looking at approaching
somebody to invest in real estate, what are they looking for?
They're looking for a return and they're looking for security.
Now, to entice them to invest, you want to give them a greater return.
And that's why joint ventures are so attractive to a lot of people.
But here is what you might
want to consider when it comes to putting together a joint venture.
Check it out over here. So this is a deal.
We've got a piece of property that I identified that I want to invest in.
And I want to bring in a joint venture partner here that has cash.
Now, as I stated, you could do this as a tick.
You could set up an LLC to put it together.
However, those have their pros and cons, and in this particular case,
what I think would always work out better and this is the reason I call it
my best, is consider making this person here a lender.
Now, when you think of lenders, you typically think of interest rates, right?
But this is going to be a different strategy here.
It's not the typical lender or borrower relationship
where this person right here that you're considering asking to put into this
deal is going to get an
8% return on their money or possibly 10% return on their money.
No. What we're angling to do here with this individual
that we're going to bring in on our partnership is we want to bring them in
and really give them some benefit from investing.
Because when you're thinking about a typical joint venture, you know, 50, 50,
6040, that's not going to come close to this 8%.
So if you want their money, you want to structure them as a lender,
but with a very specific provision in that agreement,
which I'll cover here in just a moment.
So I find my property, what I want to do then is, of course,
you want to take this down in a limited liability company
and you're going to get your your partner over here.
And what you're going to do with your partner
is you're going to make them an offer.
You're going to say, listen, if you help fund this deal and this LLC
that I own, that I own and I control, I'm willing to do this.
I am going to give you a promissory note.
So we're going to put her into a loan agreement
where I'm going to give you a promissory
note where I agree to pay you 8% interest on your money.
However, I'm also going to give you 40%.
Now, these numbers you can come up with, you got to negotiate.
I'm going to give you 40% of the profits.
Okay. When this property sells.
So this type of arrangement lends itself extremely well
to those deals that you're going to rehab and flip because no one's going to want.
40% of our profits are split on a rental property
because you're not going to you're holding that property long term.
So I'm not going to get their money back right away.
And they're not into it just for the interest.
They're looking for something more.
So this really lends itself to flip deals.
But the point is, is that you tell me
you're going to get 40% of the profit when the property sells.
So what they're doing now
is they're participating with you in the actual sale of that property.
So they get all that upside or 40% of the upside, plus their interest.
Now the attractiveness from the lender standpoint that we have here
is that in a typical joint venture where you're using a limited liability company,
the person that brings the money to the table,
they have no security interest in the deal,
whereas in this case you're going to give them a deed of trust.
So they're going to be able to secure their interest in the property.
And this is how you sell it to them.
You say, listen, you know, we could set up an LLC, you become a member in the LLC.
But in that instance, if something goes wrong with the property,
you're not secured against that property because you're just a member in the LLC,
but as a lender you're in a stronger position here
by being a lender, you're going to get a deed of trust against the property
so that if I whenever I sell, you know, you're going to be notified
and you're going to get paid this 40% interest.
This is called a participating note is what we're talking about here.
And in that note, you outline what is going to be all the costs
that are deducted from the sale so we can determine profit
so the lender knows what they're going to receive of that eventual sale.
And so the lender comes in,
they loan the money, it gets secured against the property.
You as the manager of your limited liability company, you have complete
control over this project.
You're the one running it.
And then when the property sells, let's say we make $80,000 on this deal,
we'll 40%.
And any unpaid interest from the sale of this 80,000
is going to go to your lender and then you're going to take
the difference, whatever is left.
So it's a clean way to put together
a joint venture with a third party, but you're giving them
additional benefits are going to collect some straight interest on the deal
and they have a secured interest in the property.
The benefit to you is that you don't have someone you have to report to.
You got the project, you're in control, that you're running it all by yourself.
Hey guys, if you like this strategy, then I highly encourage you to learn
more about real estate tax and asset protection by attending my free Live
Tax and Asset
Protection event, where we're going to be answering
your questions, taking these types of strategies that I was just showing you
and putting them into action, plus the various other ways
you can use entities to invest in real estate and harvest
massive tax deductions from the tax code.
If you want to sign up for that event, there's a link in the show notes below.
Smash that link, get yourself signed up and I look forward to seeing you there.