JV Attempt Going Sideways - Strange Advice?

[selewis]

So... embarking on my first JV...

But the person who was planning on being the "money person" is getting advice from a lot of people (financial people). We have moved from my original presentation: "Your money, my expertise." Would put my name on the mortgage, title, I would deal with lawyers, insurance, property management, etc. She would input the money, protected by the JV agreement, for a 50/50 split.

Financial advisors to her: "Make sure your name is on the mortgage and title."

Okay, we can work with that. Heck, it`s the same money for me with less work.

More dialogue.

Financial advisors to her: "Set up the bank account in your name, and you control the cash flow to this guy."

Hmm... somehow I think we are moving further and further away from the original intent of this thing. She`s getting all the work that I was trying to remove from her. I`m still getting the cash flow. So in the end it could be a better deal for me. Same return without all the work! But the work is exactly what I was seeking to remove from her plate for her sake (she is a gun-shy former landlord who believes in the value of investing in real estate, but does not want the headaches that go with being a landlord).

I would still be liaising with property management and making decisions about the property regarding m&r and refinancing and selling eventually. But almost everything else would be hers to manage - insurance, lawyers, banks, bank account.

So, what do I do? She is still open to a 50/50 split! Her money. Her mortgage. Her insurance. Her bank. Me 50% profits.

Is she crazy? Or am I for thinking it`s unfair to take 50% return for a lot less work?

 

[mflynn]

Hi there, I`m sure you`ll get a lot of different advice on this one. I think it sounds like a trust factor and I think you`re asking for trouble. I also think if something sounds too good to be true, it usually is.

We have done a total of 8 joint venture agreements and sure I`ve tweaked the arrangement based on some of the things that various people have requested, but the basic set up is the same for all. The first premise of the joint venture agreement has to be trust. If she doesn`t trust you with managing the cash flow, she won`t trust you with anything!

On the other hand, you`re right, if she still wants to give you 50%, it`s hard to resist..... I`ll bet when push comes to shove, she`ll try to renegotiate the 50%

Just my two cents worth.............

Mary

QUOTE (selewis @ Apr 8 2009, 07:56 AM) So... embarking on my first JV...

But the person who was planning on being the "money person" is getting advice from a lot of people (financial people). We have moved from my original presentation: "Your money, my expertise." Would put my name on the mortgage, title, I would deal with lawyers, insurance, property management, etc. She would input the money, protected by the JV agreement, for a 50/50 split.

Financial advisors to her: "Make sure your name is on the mortgage and title."

Okay, we can work with that. Heck, it`s the same money for me with less work.

More dialogue.

Financial advisors to her: "Set up the bank account in your name, and you control the cash flow to this guy."

Hmm... somehow I think we are moving further and further away from the original intent of this thing. She`s getting all the work that I was trying to remove from her. I`m still getting the cash flow. So in the end it could be a better deal for me. Same return without all the work! But the work is exactly what I was seeking to remove from her plate for her sake (she is a gun-shy former landlord who believes in the value of investing in real estate, but does not want the headaches that go with being a landlord).

I would still be liasing with property management and making decisions about the property regarding m&r and refinancing and selling eventually. But almost everything else would be hers to manage - insurance, lawyers, banks, bank account.

So, what do I do? She is still open to a 50/50 split! Her money. Her mortgage. Her insurance. Her bank. Me 50% profits.

Is she crazy? Or am I for thinking it`s unfair to take 50% return for a lot less work?

 

[emarsig]

I would not be pessimistic on this one. Your JV puts the money in and wants to feel in control. She does not want the headaches. She shoudl have the right to access the account (hence in her name) and check up on you. No problem. You`ll however need power of attorney to use the account as well to do your daily banking. Make sure you set yourself up for monthly reporting right away. Also make sure you don`t have to answer her requests weekly. Say something like "I know you are busy and you have a lot at stake. That`s why we have this JV. I`ll deal with everything on a daily basis and you get a monthly report from me. Of course you can check up on the bank account daily to give you assurance how things are going, but please understand that I can`t answer daily or weekly calls from all my investors. I`d rather use the time to make sure your property is a top performer." ... Makes sense?
QUOTE (selewis @ Apr 8 2009, 10:56 AM) So... embarking on my first JV...

But the person who was planning on being the "money person" is getting advice from a lot of people (financial people). We have moved from my original presentation: "Your money, my expertise." Would put my name on the mortgage, title, I would deal with lawyers, insurance, property management, etc. She would input the money, protected by the JV agreement, for a 50/50 split.

Financial advisors to her: "Make sure your name is on the mortgage and title."

Okay, we can work with that. Heck, it`s the same money for me with less work.

More dialogue.

Financial advisors to her: "Set up the bank account in your name, and you control the cash flow to this guy."

Hmm... somehow I think we are moving further and further away from the original intent of this thing. She`s getting all the work that I was trying to remove from her. I`m still getting the cash flow. So in the end it could be a better deal for me. Same return without all the work! But the work is exactly what I was seeking to remove from her plate for her sake (she is a gun-shy former landlord who believes in the value of investing in real estate, but does not want the headaches that go with being a landlord).

I would still be liasing with property management and making decisions about the property regarding m&r and refinancing and selling eventually. But almost everything else would be hers to manage - insurance, lawyers, banks, bank account.

So, what do I do? She is still open to a 50/50 split! Her money. Her mortgage. Her insurance. Her bank. Me 50% profits.

Is she crazy? Or am I for thinking it`s unfair to take 50% return for a lot less work?

 

[RedlineBrett]

Remember that it is your job as the expert to keep your client/partner comfortable. In my line of work (real estate sales) I am constantly having to change my approach and level of involvement to suit whichever client I`m working with. Some only want me to open doors and fax offers. Others want my company to run a large part of their business while they stay out of it as much as they can. Most are in between somewhere.

If doing all of these things makes your client feel more comfortable they you shouldn`t stand in their way. A confused mind always says `no`... so don`t be insistent about doing everything.

You will find as you and your client do business together that the trust factor grows and most of these things will find their way back into your lap. For now, you don`t want to foster a `you vs. the bank` vibe with your client. I would tell her that you have no problem with allowing her to be as involved as she wants but that you view certain tasks as your responsibility and are ok to do them too. Just shows you have nothing to hide and are a good person to work with.

Good luck!


QUOTE (selewis @ Apr 8 2009, 08:56 AM) Is she crazy? Or am I for thinking it`s unfair to take 50% return for a lot less work?

 

[Anonymous]

QUOTE (emarsig @ Apr 8 2009, 11:45 AM) I would not be pessimistic on this one. Your JV puts the money in and wants to feel in control. She does not want the headaches. She shoudl have the right to access the account (hence in her name) and check up on you. No problem. You`ll however need power of attorney to use the account as well to do your daily banking. Make sure you set yourself up for monthly reporting right away. Also make sure you don`t have to answer her requests weekly. Say something like "I know you are busy and you have a lot at stake. That`s why we have this JV. I`ll deal with everything on a daily basis and you get a monthly report from me. Of course you can check up on the bank account daily to give you assurance how things are going, but please understand that I can`t answer daily or weekly calls from all my investors. I`d rather use the time to make sure your property is a top performer." ... Makes sense?

My two cents from having completed over 50 JVs...

I agree with Ernst on most of this except the bank account and the monthly statements. If you are responsible for the day to day management, that includes the bank account.

They DO NOT get control of the bank account. Opens you up to issues of with-drawls, etc. who did it, you , me - no way... a great way to set up an argument.

As for Monthly Statements - this has been one of our biggest areas of difficulty to manage - I`m sure there are a few rein members who are my Joint Venture partners who will agree with this. The key point is that be carefully what you suggest because as you grow your joint venture business, it will become a life of statements and questions.

We have gone from monthly to yearly to settle on quarterly. We have (after 5 years) come up with an internal process where by we have the quarterly statement ready by the end of the month following the end of the quarter. I am not an accountant and this has been one of my biggest areas of challenge. Thanks to my partner John and our team, we have finally licked it.

IE Q1 will be completed and sent out April 30. Now, for us, we have 40+ statements to do right after taxes... it`s going to be a stretch but i think we can do it.

While on the topic... plan on having year end taxes completed by the middle of March. It has taken one of our property management companies until late Feb to finalize December statements and in several cases, we have not received final mortgage statements until late Feb. That means that you have to have the final adjustments completed in the first week of March and buy some time and have statements out a bit later.


2) If you have not waved conditions, pull the property and terminate... from experience, if the individual is nervous now, they will be very difficult years from now. Please don`t sell yourself short. You are providing a great value to them.

If their financial adviser is giving "don`t do it" advice, look behind the curtain and see how they will benefit. IE, are they suggesting to put the money in the market with them. Greg Habstritt did a great presentation on financial advisors and how they get paid. I`m sure he still has it on his site. I would look at rrspsecrets.com

I was at a JV presentation in front of an 80 year old lawyer and family friend for over 50 years. "This is a good deal, I would do it" I have been presentations with financial advisors who call me up later and ask to JV with us or do 2nd mortgage.

Arland used to show us that he would take his zip-up presentation binder and do the following:
a) forcefully close the binder
b) start to zip it up and say "well it looks like this investment isn`t for you"

I have used it so many times... the first time, i was sooo scared, and it worked!!!!! Now I don`t beg for money... If they want to do the deal, great, if not, great. Just don`t sell someone an investment they won`t be happy with.

I met with a guy yesterday, is considering investing $3.3M with us to purchase 80 Town Home Condos.... same thing... here are the facts, here is the deal... if your not interested, great, if you are, great...


3) Stand your ground. Your uncertainty is creating the continued push for more control by the other party. Real the Law of Attraction and watch The Secret. At the end of the day, a 50/50 JV is a good deal for the investor. It`s a great deal for you. There are countless rein members doing a 50/50 JV and their clients asking for more.

Next, you will want to consider charging an acquisition fee or a set up fee. We charge 2.5% of the purchase price. I know some guys who charge as much as $10,000 flat per property plus 50/50.

With this, the golden rule does apply... but remember, the gold always needs something to buy. (BTW The golden rule is "those who have the gold, rule") I personally think this comes from a place of scarcity and fear. A good deal will always attract good money.

Best of luck and don`t sell yourself short.

 

[RedlineBrett]

WOW post of the day goes to Mark! That was a gooder... thanks for sharing!

 

[GaryMcGowan]

Mark that is a quality post!!! I look forward to reading more of your thoughts and learning from your experience.

 

[zimnicki]

QUOTE (MarkGarrett @ Apr 8 2009, 11:22 AM) My two cents from having completed over 50 JVs...

I agree with Ernst on most of this except the bank account and the monthly statements. If you are responsible for the day to day management, that includes the bank account.

They DO NOT get control of the bank account. Opens you up to issues of with-drawls, etc. who did it, you , me - no way... a great way to set up an argument.

As for Monthly Statements - this has been one of our biggest areas of difficulty to manage - I`m sure there are a few rein members who are my Joint Venture partners who will agree with this. The key point is that be carefully what you suggest because as you grow your joint venture business, it will become a life of statements and questions.

We have gone from monthly to yearly to settle on quarterly. We have (after 5 years) come up with an internal process where by we have the quarterly statement ready by the end of the month following the end of the quarter. I am not an accountant and this has been one of my biggest areas of challenge. Thanks to my partner John and our team, we have finally licked it.

IE Q1 will be completed and sent out April 30. Now, for us, we have 40+ statements to do right after taxes... it`s going to be a stretch but i think we can do it.

While on the topic... plan on having year end taxes completed by the middle of March. It has taken one of our property management companies until late Feb to finalize December statements and in several cases, we have not received final mortgage statements until late Feb. That means that you have to have the final adjustments completed in the first week of March and buy some time and have statements out a bit later.


2) If you have not waved conditions, pull the property and terminate... from experience, if the individual is nervous now, they will be very difficult years from now. Please don`t sell yourself short. You are providing a great value to them.

If their financial adviser is giving "don`t do it" advice, look behind the curtain and see how they will benefit. IE, are they suggesting to put the money in the market with them. Greg Habstritt did a great presentation on financial advisors and how they get paid. I`m sure he still has it on his site. I would look at rrspsecrets.com

I was at a JV presentation in front of an 80 year old lawyer and family friend for over 50 years. "This is a good deal, I would do it" I have been presentations with financial advisors who call me up later and ask to JV with us or do 2nd mortgage.

Arland used to show us that he would take his zip-up presentation binder and do the following:
a) forcefully close the binder
b) start to zip it up and say "well it looks like this investment isn`t for you"

I have used it so many times... the first time, i was sooo scared, and it worked!!!!! Now I don`t beg for money... If they want to do the deal, great, if not, great. Just don`t sell someone an investment they won`t be happy with.

I met with a guy yesterday, is considering investing $3.3M with us to purchase 80 Town Home Condos.... same thing... here are the facts, here is the deal... if your not interested, great, if you are, great...


3) Stand your ground. Your uncertainty is creating the continued push for more control by the other party. Real the Law of Attraction and watch The Secret. At the end of the day, a 50/50 JV is a good deal for the investor. It`s a great deal for you. There are countless rein members doing a 50/50 JV and their clients asking for more.

Next, you will want to consider charging an acquisition fee or a set up fee. We charge 2.5% of the purchase price. I know some guys who charge as much as $10,000 flat per property plus 50/50.

With this, the golden rule does apply... but remember, the gold always needs something to buy. (BTW The golden rule is "those who have the gold, rule") I personally think this comes from a place of scarcity and fear. A good deal will always attract good money.

Best of luck and don`t sell yourself short.

email me, would like to chat with you!
[email protected]

 

[TodorYordanov]

It`s sooo good to have you back on this board Mark.

Todor

 

[Thomas Beyer]

QUOTE (selewis @ Apr 8 2009, 08:56 AM) .. She is still open to a 50/50 split! Her money. Her mortgage. Her insurance. Her bank. Me 50% profits.

Is she crazy? Or am I for thinking it`s unfair to take 50% return for a lot less work?
YOUR bank account .. YOU`RE in control ..

Investor needs a decent JV agreement and the right to file a caveat on title (or possibly be on mortgage which actually increases the risk for investor !!) ..

Offer monthly accounting statements in year 1 .. then quarterly ..

If investor doesn`t trust you: do not do a deal .. find another investor !

Ask them SPECIFICALLY why they need this ? What specifically do they not trust you with ?

Ask how much money financial advisor made them in the last 5 years !! If less than 50% or 20% (or 0) even .. why is his advice VALID ??

Look at the 25+ item task list you do here ..

http://myreinspace.com/public_forums/Real_Estate_Discussion/62-2015-5050__is_this_fair_.html

then ask them if they wish to do all that .. you do all this work, bring 75% to 80% of the money to the table (via a mortgage) and you get only 50% profit ??

 

[vandriani]

Well, that covers my REIN fees for this month. Brilliant post Mark. It`s great to have experienced investros in JVing provide some of thier experiences. For me, they are filling in some fo the things that JV Secrets does not get into great detail about. Don`t get me wrong, the JV Secrets package is great but these types of posts give you that extra 10%. Thanks Mark and to all the others that are providing thier knowledge.

 

[Dan_Eisenhauer]

It definitely needs to be your bank, and don`t waiver on that.

One more option, but it adds to the complexity of the working relationship, is to require both signatures on the cheque. The complexity comes from being unable to find the other partner when an important cheque needs to be drawn.

Mark`s advice is right on.