Is it prudent to do a Joint Venture while I`m learning about investing?

[lucyb]

I`m very new, not even a member. I have read Don Campbell`s book, RE Investing in Canada, and it makes a lot of sense.

I would appreciate any advice or opinions very much.

I want to get started investing in real estate as soon as possible.

However, I can`t see myself investing without having any knowledge, and if I join REIN I expect it may take me at least 6 months or more before I get a bit educated. (right?)

I have a substantial down payment amount available, which for the meantime would just be sitting in the bank, getting a few percent interest. If there are 6-8 months before I can get started investing I wonder if it`s possible--or even prudent--to do a joint venture with my money during that time?

My parameters are I have no skills; I do have money and some time; and I would need my money available to me again in 6-8 months (when I hope to buy a first home and have a plan for future investment). A concern would be, I don`t know how to evaluate a good JV partner. (Do REIN members give referrals of partners to look into?)

If this idea seems hopelessly naive, please bear in mind... I`m just starting out!

Many thanks,
Lucy

 

[Thomas Beyer]

yes, you should wait .. perhaps buy some REITs or real estate related stocks as they are liquid .. (say: BEI.un NPR.un IS.un IIP.un REI.un BPO MEQ) .. there are about 20 Canadian REITs and 100+ in the US .. the last two listed are stocks

you could also lend money using 2nd mortgage providers .. usually they`re 9-15 months minimum though ..

most JVs are 2 - 5 years .. unless short term, quick fix (higher risk) construction oriented or bridge financing .. and those could yield 20%+ but are more risky and take some knowledge to investigate / analyze ..

 

[GSI]

QUOTE (thomasbeyer2000 @ Mar 28 2008, 04:55 PM) yes, you should wait .. perhaps buy some REITs or real estate related stocks as they are liquid .. (say: BEI.un NPR.un IS.un IIP.un REI.un BPO MEQ) .. there are about 20 canadian REITs and 100+ in the US .. the last two listed are stocks

you could also lend money using 2nd mortgage providers .. usually they`re 9-15 minimum though ..

most JVs are 2 - 5 years .. unless short term, quick fix (higher risk) construction oriented or bridge financing .. and those could yield 20%+ but are more risky and take some knowledge to investigate / analyze ..


Hello Lucy,

Congrats on reading Don`s book and taking action. As you`ll find reading through the REIN forum there is a fair amount of help and guidance regarding finding a JV partner that you can trust and one that will guide you. Beginning your real estate journey as a JV partner will also give you valuable insight in how the deal gets put together if you find a partner that is willing to share his knowledge- and if you`re interested in learning.

REIN does not have an approval process for JVs nor does endorse specific people. REIN does have a JVP due diligence check list for both the finder and partner. It is very rigors. If you are a REIN member you can access it in the critical forms area. This covers many of the points.

A few quick points of reference for you when you look for a partner (there are more, but this will give you a basic idea):

1) Look for someone with a track record. I would say a minimum of 4 deals completed. I`d like to see if the partner used any of his own cash, but this isn`t necessarily a good or bad indicator of a good JV. Can you see their track record- is it successful?

2) What is his area of speciality? What type of property, target area, skill? What exactly does he/she bring to the table?

3) Does your potential partner have JV referrals that you can call and/or read? Check them.

4) How long has he/she been doing this for? I`d look for someone that isn`t too green, someone who has a couple of years behind him.

5) Can you run a criminal check on him/her? Any history of bankruptcy? At least ask these questions, you may not need to get a criminal check- but if the partner feels uncomfortable about this, ask why? Bankruptcy may not be the worst thing either if he has done a turn around. But, it`ll make you think twice about putting your cash with him/her.

6) Ask them what problems they`ve had and what they`ve learned doing JVs? What`s the hardest thing for them being the finder?

7) Do they follow the REIN system- if that is important to you? If no, what system do they follow? Do they have legal documents prepared from their lawyer? Can your lawyer read them over? (when you`re closer to doing the deal, you`ll have your lawyer read them)

8) Are their projects realistic? Do the deals that they set up look too good? Compare against their actual results. Can you see the project/property breakdown on the prospective deal?

Another key factor is that you and your partner`s goals align. Take the time to see if you are a match. And, remember it`s a two way street. JV finders (the folks who set up the deals) are busy too. They want to work with folks that are serious and sincere about building their portfolios. Respect their time as well.

Please let me know if I can help you further.

Thanks,

Todd-

 

[lucyb]

QUOTE (thomasbeyer2000 @ Mar 28 2008, 06:55 PM) yes, you should wait .. perhaps buy some REITs or real estate related stocks as they are liquid .. (say: BEI.un NPR.un IS.un IIP.un REI.un BPO MEQ) .. there are about 20 canadian REITs and 100+ in the US .. the last two listed are stocks

you could also lend money using 2nd mortgage providers .. usually they`re 9-15 minimum though ..

most JVs are 2 - 5 years .. unless short term, quick fix (higher risk) construction oriented or bridge financing .. and those could yield 20%+ but are more risky and take some knowledge to investigate / analyze ..

Thank you, Mr. Beyer!

Could you explain what does "9-15 minimum" refer to? Is that months, or a dollar amount, or...?

Best,
Lucy

 

[Thomas Beyer]

QUOTE (lucyb @ Mar 28 2008, 06:04 PM) Thank you, Mr. Beyer!

Could you explain what does "9-15 minimum" refer to? Is that months, or a dollar amount, or...?

Best,
Lucy

sorry .. yes, months ..

JV comes basically in 2 flavours: % of equity (unlimited ROI but could be 0 or negative including potential full loss of capital) or fixed %, usually secured as a 2nd mortgage (say 8-18% depending on loan-to-value of 1st mortgage, risk and length of time money is committed). Occasionaly you see hybrids, such as minimum of X % + Y % of the equity upside.

Since real estate can go up OR DOWN no return is guaranteed, even with a personal guarantee of a person or a 2nd mortgage position. You have to understand the upside and the potential downside.

Todd lists a few good points to consider ..

 

[kboughen]

QUOTE (lucyb @ Mar 28 2008, 07:04 PM) Could you explain what does "9-15 minimum" refer to? Is that months, or a dollar amount, or...?

Hi Lucy,


Thomas is likely referring to months. Most second mortgages are typically 12 month terms. As mentioned in the above posts, 6 months is a very short period of time for a JV. You would likely be looking at high risk short term "Flip" lending.


Depending on how much time you are able to spend learning and researching and how quickly you can build your "power team", you may be ready to purchase before 6 months, for that reason, I would consider parking the money in a 4% savings account and having the money easily available when the right opportunity for your first purchase presents itself.

 

[Thomas Beyer]

QUOTE (kboughen @ Mar 28 2008, 06:31 PM) ... I would consider parking the money in a 4% savings account and having the money easily available when the right opportunity for your first purchase presents itself.


Amen to that !

 

[lucyb]

Hi Everyone,
Thank you so very much for your input. You`ve all been so GREAT. I`m learning tons. I will be back with more questions.
Lucy