Sometimes you tell the same story so many times that you think everyone has heard it but I’ve realized that’s not always the case. New investors continue to find our website everyday and they haven’t heard all of our crazy stories yet!.
I thought in this newsletter I should take the time to share how we first got started and yes… it’s a bit of an embarrassing story but the moral of the story is we all have to start somewhere.
My very first rental property that I attained over 6 years ago was a joint venture partnership. The property that was purchased was a fully detached bungalow home with a finished basement and a separate entrance. The property was on a huge lot (50′ by 200) and we were able to purchase it for under $200,000…. WOW what a great deal!
Now, I’m not stating these figures to brag, I want to show you the power of Real Estate. It’s almost impossible to find a home in Durham that’s fully detached with an over sized lot for that price today. Not sure if many of you remember, but back in 2008 there were some interesting things happening in the real estate market. This may sound crazy, but you could purchase a property with $0 down!! How insane is that?!
The only thing that was required out of pocket for this property was the closing costs and lawyer fees for this property- that totaled $2943.86. Guess what? I didn’t have the money to do it on my own.
Kind of embarrassing but the truth. I didn’t understand the power of HELOC’s (Home Equity Line Of Credits) LOC’s (Line Of Credit) etc… I did however understand the power of Real Estate and knew I needed to get in and stop standing on the sidelines. A good mentor of mine told me that sidelines are great for water boys and benches. It’s a safe place to watch the game. You can either be right or wrong but you will never get the true adrenaline rush of winning or losing.
So yes… I was broke and low on cash but a Joint Venture partnership allowed me to get started into Real Estate Investing. If I knew then what I know now, I would have done things differently. I would have used a lot more of OPM (Other People’s Money), put myself into good debt and purchased 5 more homes that year.
Listen, even people who are successful use Joint Venture agreements including the likes of Donald Trump. So whether you’re looking to purchase your first investment property or you already have 10 homes in your portfolio, there will come a time when you’ll eventually exhaust your capital. When you do, you will need to turn to a partner to help increase your wealth and monthly positive cash flow.
Most joint venture agreements work like the one I’m about to illustrate below however, they can come in a number of different flavours.
Investor A has the money but no time and wants to start investing into Real Estate
Investor B has no capital to invest but has the experience or is willing to manage the property and may be able to qualify for the mortgage
Here’s the key….. there has to be a benefit to each joint venture partner for it to work. Investor A needs something from investor B and vice-versa and it’s usually a 50/50 split right down the middle.
Now, there are obviously other ways joint venture agreements can be arranged, it’s entirely up to you and your joint venture partner.
You can do a 60/40 or 70/30 because someone is bringing more money or experience to the table, but 50/50 is the one that I tend to see transpire most often.
If anyone is interested in pursuing this path to get started, we have the Joint Venture agreements that we’ve spent hundred’s of dollars on to create. Let us know and we’ll let you know how you can get a copy for yourself.