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First Joint Venture

Discussion in 'Success Stories' started by TroyTravis, Aug 2, 2013.

  1. TroyTravis
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    TroyTravis Member REIN Member

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    I closed on my first joint venture and first property since joining REIN. My story starts way back in January when my friend with some extra money decided he was sick of the RRSP and ING account returns he was getting and wanted to put his money into real estate. Knowing that I was already renting out our old house, he thought I might want to partner up with him and he would just act as an investor. So now after 7 months of work we finally closed on our new rental in July.





    It was actually my JV partner that pushed me into joining REIN, by saying that I need to learn how we can partner up and do this together. I had been wanting to join for a while but just never pulled the trigger to get it done. It worked out great because he knew that I was learning and that I didn`t know every answer for him, and let me go find the answer and get back to him.





    After joining REIN and spending months learning about ACRE, I attended my first ACRE event and bought Russell`s joint venture book. Then spent another month or more learning how to do a joint venture and creating my own documents. Then I started looking for a house to rent out. After spending another couple months finding, closing, settling on a joint venture agreement (with a partner who wanted every I dotted and T crossed, so it took up a lot of my time just getting all the wording in the agreement to satisfy both of us) and now going through the stress of finding tenants, it sounds like we have the house fully rented.





    This Success Stories Forum was always one of the first forums that I would read even before and after joining REIN because it always gave me a boost to hear that people were succeeding. So my advice to someone reading this that is looking for advice, would be to just start taking action. I did not know everything that I was doing but I was willing to work hard to learn. At the time I didn`t always know what my next step was because I had never been through it before, but then my lawyer would say `ok now you need to do this` or my realtor would say `you really need to take care of this` and in the end it all got done even though I didn`t always know what was going to come at me next. I heard so many people say just start taking action and it is true.





    Thanks to the usual suspects, Thomas Beyer, Sherilynn, and Adam Hoffman for answering a lot of my questions and I am continuing to ask them and get answers. Thanks to others that answered my posts as well, these 3 just seemed to answer on a continual basis.





    Hopefully the next one will be easier and won`t take as long to complete now that I have done one already.





    Troy
     
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  2. ThomasBeyer
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    ThomasBeyer Well-Known Member REIN Member

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    Congratulations !



    Well done !



    Now onto # 2 .. it will be a bit easier .. and then #3 even easier ..
     
  3. MooseHead
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    MooseHead New Member Registered

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    Congrats!



    Great read, thanks for sharing.



    How did you like the ACRE home study set you got along with your REIN membership?
     
  4. Sherilynn
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    Sherilynn Well-Known Member REIN Member

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    [quote user=sandisoz8]I heard so many people say just start taking action and it is true.


    So true!



    Congratulations! And keep moving forward. As Thomas said, it gets easier.



    And thank you for the kind words. :)
     
  5. Joan Lee Tu
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    Joan Lee Tu Member REIN Member

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    Congrats and thanks for sharing!
     
  6. margaretcowan
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    margaretcowan Active Member REIN Member

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    Congratulations Troy!



    I see these keys to your success.



    You got motivated.

    You got educated.

    You took action.

    You surrounded yourself with knowledgeable investors & a good real estate investing team who helped you.



    Let us know about your next real estate investing success!



    Cheers

    Margaret



    Mama Margaret & Friends Cooking Adventures In Italy

    www.italycookingschools.com

    www.facebook.com/MamaMargaretandFriends
     
  7. melkinch
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    melkinch New Member Registered

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    Thanks Troy,

    I am a recent REIN member myself and this is the first time I have been in this forum. Your story reminds me of the power of a team. The other REIN members helped you and I am excited to be a part of something as powerful as this REIN "team" as well. Keep up the good work and keep us posted. I have a couple deals closing in the next few weeks and your story reminded me to share that story once it is complete as well so others can benefit from the journey.



    Take care and God bless

    Melanie
     
  8. nubiwan
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    nubiwan Member Registered

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    Troy



    Would you care to share how you strucutred your deal with your partner? What was his investment? What was yours> Any mortgage or lender financing involved (I assume not).



    How do you share the cashflow (if any exists)?



    How does either partner get out of the deal? What is the exit strategy?



    I am in a situation now were mortgage financing is going to be difficult, so JV partnering is one avenue I must explore.



    Thanks for any direction you can offer.



    Tony
     
  9. GigiHunter
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    GigiHunter New Member Registered

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    Great story and thank you for sharing! It's always very motivating to hear the stories of other investors who take the plunge and come out with a great success!



    I look forward to reading more in the future!



    Gina Hunter

    Golden Gates Investments
     
  10. TroyTravis
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    TroyTravis Member REIN Member

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    [quote user=nubiwan] Troy



    Would you care to share how you strucutred your deal with your partner? It was just a straight 50/50 deal where at the end of 5 years we both get any money we put into the deal back first, then we split all the profits 50/50. He was basically an investor and just put money in and I run everything else.

    What was his investment? He put in the money for the down payment on the house.

    What was yours? I paid for all closing costs, my partner asked that I do this, he kept thinking that if I didn't have any money in the deal, then I wouldn't really care if we lost money or that I wouldn't care about running it properly, and I couldn't convince him otherwise. Being my first joint venture, I really wanted to have the experience, so I gave on a few things in order to make it happen. I also put down the $1000 original deposit that is put down when you have an accepted offer on the house. I had not received any money from my partner yet so I had to put it down myself due to timing, I couldn't wait for him to transfer money between his own accounts and then somehow get it to me so I could put down the deposit. Next time I will get all or some of the money before I get to this point so I can use their money. Or if they are paying for everything else I might put down this deposit and that would be the only money I put in.

    Any mortgage or lender financing involved (I assume not). Yes, we put down 20% and have a mortgage for the rest and the mortgage is in both of our names. After reading again, I wonder if you meant seller financing. No, there was no seller financing.



    How do you share the cashflow (if any exists)? We are not taking any money out until after 5 years when we sell or refinance, at this point anyways. We do have a line in our contract that we can take some money out early if there is enough of a reserve fund and we both agree to take some out. I think we added this line ourselves to our JV agreement.



    How does either partner get out of the deal? What is the exit strategy? I basically chose a lawyer who is well versed in joint ventures and paid for their standard joint venture agreement. We added lines ourselves to the agreement, mostly things my partner wanted included, but I don't think we added anything to do with exit strategy. It was all already in the agreement, it basically has everything in it from if one of us dies, to if one of us wants out for any reason, to if one of us wants to sell and the other doesn't, to if one of us wants to buy the property off the other. So we figured it is all covered and went with what is in the agreement.



    I am in a situation now were mortgage financing is going to be difficult, so JV partnering is one avenue I must explore.



    Thanks for any direction you can offer.



    Tony






    Hopefully this answers your questions and helps out a bit. I have another rental property on my own and I must admit, I find it a lot more strenuous when I am using someone else's money. If I lose my own money I can live with it, if I lose an investor's money, I will be a lot more upset about it. So I find myself trying to do everything I can to save money and grown his ROI, sometimes it might not be the best decision for the property, but it is hard to get that across to an investor who is only looking at the cash coming in. He is asking me things like if I have energy efficient light bulbs to save on hydro bills, and if I am going to get my real estate licence so we don't have to pay one when we sell, or if I can transfer any reserve fund money every month to a high interest savings account to get a couple extra percentage points on interest. I have read about investors who basically just put in their money and get their quarterly statements and let the real estate expert run everything no questions asked, but mine isn't one of them.
     
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  11. AminMurji
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    AminMurji Member Registered

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    Congratulations on your first JV.



    Looks like you are managing the property. Are you charging any Property Management fees to JV or is that part of your contribution to the deal?
     
  12. TroyTravis
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    TroyTravis Member REIN Member

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    I did get a property manager. That was one of the areas where my partner thinks we should be saving money, by not using a property manager. We are renting to students and the house is not in the city I live in. So my thoughts are, this manager has people paid just to find tenants by doing showings etc. And if someone asks about a different house they are renting out, then they will show mine at the same time, so they have access to more leads than I ever could. And I wouldn`t be able to get over there every day in August to show the place to 30 different students. And they are also on call 24 hours a day, students are different than adults, they don`t know what to do if there is a leak if I am not available or they can`t get a hold of me. So to me, having someone on call is worth the money paid for a manager. And if I can't find tenants before school starts, it's not like you just keep advertising and someone will come along. I would probably waiting until the next year or at least the summer to get it filled. So to have a professional getting it filled seemed the best idea for me. My partner doesn't like paying for the manager, but if I didn't get it filled he wouldn't like that either. I found it hard explaining that I am getting paid for running/managing the property, but I am still using a property manager. He was asking what I am actually doing.



    My property manager allows me to go do things so that I don't have to pay him to do it, so he calls and says this needs to be fixed and I can go do it or say no, you go do it. Right now I am trying to do as much as I can to save money, if it was my own property, I would probably just tell him to do it. After the first couple of months there hasn't been much to do lately, mostly just the first bit when tenants were moving in for the first time.
     
  13. KevinMurray
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    KevinMurray New Member Registered

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    Hey Troy. Congratulations on your first JV! I'm hoping to embark on my first one this coming year. Quick question if you don't mind. Did you set up a business account to manage the JV/finances or did you just use a personal account? Thanks for your help.
     
  14. Matt Crowley
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    Matt Crowley Well-Known Member Registered

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    Personally, I don't think that starting a corporation is worth it for your first property / JV. There are literally no tax savings to my knowledge in having a corporation over a personal partnership. I'm asked my accountant this and he doesn't know of any advantages either.

    You can set up a business account as a sole proprietorship or partnership but the question is...why bother? You aren't going to charge GST and now you are going to have to deal with CRA on a regular basis asking for GST remittances.

    If you open up a joint personal account you have literally every service available to you as with a business account.
     
  15. KevinMurray
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    KevinMurray New Member Registered

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    [QUOTE="SweetZone, post: 158474, member: 20748" If you open up a joint personal account you have literally every service available to you as with a business account.[/QUOTE]

    Perfect. That is exactly what I was looking for. Currently I use my personal accounts to manage my two properties but moving forward I want to keep it separate especially with a JV. Appreciate your help SweetZone!
     
  16. Matt Crowley
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    Matt Crowley Well-Known Member Registered

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    All good Kevin. I looked back this year on consolidating my accounts for my properties but decided it ultimately wasn't worth it. For $10 a month in bank service fees, it is a great bookkeeper. Plus I use QuickBooks so I can upload all the transactions online and just assign each transaction to the correct property and then consolidate the statements on a company-wide level. (Overall cash, debt, equity, and assets).
     
  17. KevinMurray
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    KevinMurray New Member Registered

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    Hey Matt,

    Quick follow up to your last reply.

    I am considering doing a JV deal where they qualify for the financing and we are both 50% owners. I plan to set up a separate bank account but I am not sure how that works with mortgage payments each month and cashing rental cheques.

    Is it possible to connect the account to their mortgage payment but we are both on the account so I can manage the rental payments and expenses?

    Any insight is greatly appreciated. Thanks.
     
    Last edited: Nov 4, 2015
  18. Matt Crowley
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    Matt Crowley Well-Known Member Registered

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    ^ Yes. Any bank will allow you to set up a joint account. You just get two signing authorities and two debit cards. Super easy.

    If it were me though, I would create a separate account but I would retain the account access. Ultimately, if it were me managing I would want the money partner to trust me to handle the finances and ongoing management. I would not want the concern that they may take out some money that was budgeted for a repair, for example.
     
  19. Tina Myrvang
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    Tina Myrvang Client Care Specialist Staff Member REIN Member

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    Congratulations!!! Please report your properties purchased since you joined REIN. You will be presented with a PIN for each level you reach and will be awarded on stage!
    3 Doors - Bronze Pin
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    50 Doors - Platinum Pin
    100 Doors - Diamond Pin
    Report your properties at: http://reinawards.com/awards/
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  20. KevinMurray
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    KevinMurray New Member Registered

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    Thanks again for all your help! I'll be using this strategy moving forward.

    All the best,
    Kevin
     

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