Mandatory Donations on JV Properties-Social Responsibility

[jarrettvaughan]

In an effort to be more socially responsible, I have been thinking about including a non-profit donation line into my cashflow statement.

What I mean is, I would include a donation of 5%-10% of the monthly revenue (not profit or cashflow) in the cashflow statement. This would be a mandatory commitment on my behalf and the behalf of the JV partner that we would give this money each month to our selected organization (World Vision, Habitat for Humanity, Red Cross, Green Peace, local charity that is working with the community that is making social improvments, thus improving our property value etc etc).

I believe that it is very important to give back with our financial means, but often this gets over looked when expenses increase or we have not made the commitment. So many of us have goals of helping other people when we reach our personal Belize, but I believe that if we don`t help those in need with the little bit of money that we have now, that when we get "rich" we most likely will not start donating then either. This idea is birthed out of an effort to train myself and my future partners to give when we only have little to give.

I also believe that building the donation in as an expense confirms our commitment to social responsibility. This means, every time we collect rent, we give money away, just like our property management expense or other revenue related expenses. This would also mean that we would only purchase properties that would allow for cashflow with this donation expense included.

Is this a reasonable thing to do?
Is it reasonable to expect my investors to be on board with this?
Is it reasonable to force investors to do this, or should it be optional?
Has anyone else done this?

Who`s name should the donations be in? Obviously, there would be tax receipts issued for these donations so is it possible to put both investors name of the receipt so that each person could benefit? What would be a fair approach for tax implications?

I think that if this approach could be adopt by all REIN members, we could really increase our impact on our community, province and country!!!

I am interested to hear your thoughts.

 

[invst4profit]

Is this a reasonable thing to do?
Is it reasonable to expect my investors to be on board with this?
Is it reasonable to force investors to do this, or should it be optional?
Has anyone else done this?

Yes it`s reasonable.
No it is not reasonable to expect investors to be on board.
They can not be forced, they have the option not to partner.

You have the option to offer this to potential investors and this may be appealing to some.
The upside is you will feel good, the down side is you may lose some potential investors.

Charitable donations are a personal decision that could complicate business arrangements.

 

[TodorYordanov]

I was thinking along the same lines. You can say to a JV that this cost is build-in and not negotiable. As long as the donation is a reasonable amount I don`t think many investors will object.
It is how you explain it that will make the difference and your explanation for doing it is great.

 

[EdRenkema]

QUOTE (TodorYordanov @ Mar 12 2009, 08:32 AM) I was thinking along the same lines. You can say to a JV that this cost is build-in and not negotiable. As long as the donation is a reasonable amount I don`t think many investors will object.
It is how you explain it that will make the difference and your explanation for doing it is great.

I`m with you Todor, it is in how you present it. Great idea! It doesn`t have to be complicated, a percentage of positive cashflow thrown off by the property will go to a recognized charity, possibly have the investor participate by choosing which one of a select list. Calculate when doing year end for the property.

 

[CalvinPeters]

You are in full control of your portion of the deal. Give away 100% of your 50% (or whatever it is) if you want. I personally wouldnt be interested in having someone else decide when/where/why/how I would be making a charitable contribution. In fact I would find it offensive. I like the IDEA of what you are trying to do, you are a nice person, but the buck stops there. IF you are trying to build net worth for your JV Partners, you have no more right to force a donation than you have of forcing them to accept a religious principle, or other sticky topics. Having said that, if you can get people to agree with you, great, do it. I cant see it being a selling feature though.

My thoughts, not yours...and worth what you paid for em! cheers, calvin

 

[invst4profit]

Ditto to that.

I think putting restrictions on an agreement that reduces the profit margin for an investor is only going to be perceived as a negative.
We are after all talking about people that want to invest money to make money not improve the world.

 

[RedlineBrett]

Give the investor their $, they will choose if they want to donate it or not.

Your investor is going to do business with you because you can make them money, not because you are a great humanitarian.

 

[lanedry77]

Agreed. I think the best you can do it to donate a portion of your profits. If you do that, you could easily use that as a marketing edge, but it`s not reasonable to force a JV to donate. afterall, you don`t know their situation or beliefs. They might be donating 100% of their profits to a charity you don`t believe in!

I know of (and highly respect!) a few members that do just that - 5% of their profits go to a charity. I think it`s a great way to do business, but mandating a donation is just not reasonable in my mind. (although suggesting or encouraging would be fine!)



David.

 

[invst4profit]

Most of my excess profits go to the Federal Church, I mean government!!!

 

[jarrettvaughan]

This is all very good insight.

I am trying to figure out how to balance being a responsible citizen and using my influence (or lack of influence) to help the world. I don`t know that it is wise or effective to mix social responsibility with business in this situation. I am already giving a percentage of my portion of the JV ownership to charity but it feels as if the impact would be greater of both partners were involved.

I also think the success of this concept is based on your view of a JV. Is it a partnership or are they investors (which is the current view). I think that if they are investors, this concept may not work, but if you are partners in building wealth, providing clean and affordable housing and making an effort to enhance the neighbourhood, than this concept might work? Thoughts????

If I were to do this, can you see any benefit as far as tenant marketing is concerned? Many times we are viewed as the rich bad landlord who is out to screw the tenant/world. Could marketing the fact that we give X% of our revenue to XXXX Charity to improve your neighbourhood, thus we are not evil?????

 

[invst4profit]

Many see charitable donations as a tax deduction for the rich so this may not
change the opinions of those tenants that already view landlords as rich.
One should donate to charity to help the less fortunate and please themselves.
Sharing that information with others (tenants or potential partners) serves very little purpose
from my perspective.
Seek out like minded investors for the purpose of donations but try not to over sell the idea or
some investors, strictly in the business as an investment, may get the wrong impression of
your agenda.
You are probably on top of your game but some, myself included, may question whether you
are centered 100% on the business goals.

Only my personal opinion.

 

[lanedry77]

Hi Jarrett,What about saying that you will contribute 5% of your profits to charity, but will also match any dollar your partner/investor donates on top of the 5%.

So if they donate nothing, you`re committing to them to donate 5%. If they donate 10% of their profits, you`ll donate 15% of yours. (pick your own numbers of course, and you may choose to put a maximum percent or dollar amount in there)

That at least (1) shows you`re serious about helping the world, (2) encourages them to help as well, and (3) doesn`t force you to go above your minimum if they don`t contribute.

You might sweeten the pot even more by saying anything you match will go to the charity of their choosing [a registered charity, of course]. but keep the tax receipt for yourself, of course.

I like your idea here too, for the record. Very commendable!



David.

 

[realfortin]

I think you are simply going to lose business over it. People will feel like they are forced to give to that specific charity. They will think "If I want to give, I`ll give personally where I can get credit for it", not to mention tax implications. Some people might not agree whit the charity you choose. For example, many men feel that there is too much attention to breast cancer when prostates are left untouched. <gaffa>

I think the best approach is to mention that you proudly donate XX% of your share of <insert here>. You`ll make many more deals as a charitable and honourbable person than you would as a socialist.

My 2 cents

RF

 

[lanedry77]

Just for clarification, I meant keep the tax receipt for your donations. If the other person is donating, they get the tax receipt for that money.



David.

 

[realfortin]

QUOTE (jarrettvaughan @ Mar 12 2009, 02:39 PM) I am trying to figure out how to balance being a responsible citizen and using my influence (or lack of influence) to help the world.

It is much better to influence the world as a good example for others to follow than it is to influence the world by telling them what they should do.

Real Fortin, 7:41 pm 12 March 2009 in, Haiti,
mark this moment, this may be popular (kidding)

Oh here`s a better one I made up and used at work.

People are like ropes... it`s a lot easier to pull them along than it is to push them.

I know, I`m no Shakespeare

 

[invst4profit]

my personal favorite

Opinions are like a------s, I have one of my own so why should I want someone else`s.

 

[lanedry77]

But Réal, if you decide to donate $500 to prostate cancer research (hilarious play on words, by the way) - wouldn`t you like it if Jarrett said "I`d be happy to match that $500, and also contribute to your charity".

I can`t see the downside to that. You get your $500 tax receipt, Jarrett gets his $500 tax receipt, and prostate cancer research gets $1,000 instead of $500.

Where`s the downside in that arrangement?

If, on the other hand, you said `forget charity` and kept all your profits, why would you care if Jarrett donated $250 to breast cancer research because Jarrett is a fan of <err....> that particular charity?



David.

 

[realfortin]

QUOTE (DavidSandbrand @ Mar 12 2009, 06:02 PM)
But R&#195;al, if you decide to donate $500 to prostate cancer research (hilarious play on words, by the way) - wouldn't you like it if Jarrett said "I'd be happy to match that $500, and also contribute to your charity".


Absolutely, that would be great. I was talking about the original post with the madatory donation.



RF



PS nice one

 

[lanedry77]

Agreed - you can`t force someone to do anything against their will, only convince them of your way of thinking and have them join you (which is not easy, but at least in some situations it`s possible). Mandatory just won`t work.



David.

 

[jarrettvaughan]

QUOTE (realfortin @ Mar 12 2009, 04:38 PM)
People will feel like they are forced to give to that specific charity.




Just for clarification, the JV would get to choose the charity, so they would not be forced.





David, I like your idea of matching the donations, that seems like a win-win and a non forceful or pushy approach.