JV - When 2 Potential Investors Show Interest at the Same Time

[Nir]

Hi All,

Both investors are potential cash partners. They do not know each other, it is just a coincidence they showed interest at the same time.

What do you believe makes more sense and is more efficient in this case: buy one bigger property with both (and have less roof per unit etc.
as Thomas correctly reminds us from time to time) OR due the circumstance - they do not know each other and perhaps to reduce risk, buy a smaller property with each cash partner separately? In other words, two 8-plexes for example or one 20-plex?
(due to advantage to size assuming you can buy more units for the same total price if you buy 1 property vs. 2 properties)

Also, a completely different question: is it reasonable/common to use the money from the cash partner (the passive investor) for down payment without putting anything yourself - the active investor? Gary mentioned he is looking for cash partners. not sure if his case is similar - he puts something as well or just cash partner provides 100% of down payment required is reasonable(?)

THANKS.

 

[Thomas Beyer]

Discuss with both .. some may say "great idea ..or sure .. or whatever " .. some may say "not this time .. maybe the next deal" ..

A JV with 2 partners is FAR MORE complicated .. a more comprehensive USA (Unanimous Shareholder Agreement) is required .. so NOT recommended for the first JVs .. but maybe for the 4th or 8th !!

But, overall, if both parties say "sure" .. and you can get a USA that satisfies your and their interest it is probably better than two smaller deals with more overhead and less profit margins overall !

 

[Nir]

QUOTE (thomasbeyer2000 @ Jul 14 2009, 07:31 PM) Discuss with both .. some may say "great idea ..or sure .. or whatever " .. some may say "not this time .. maybe the next deal" ..

A JV with 2 partners is FAR MORE complicated .. a more comprehensive USA (Unanimous Shareholder Agreement) is required .. so NOT recommended for the first JVs .. but maybe for the 4th or 8th !!

But, overall, if both parties say "sure" .. and you can get a USA that satisfies your and their interest it is probably better than two smaller deals with more overhead and less profit margins overall !

Yes Thomas, I guess it depends on a few things. not an easy decision as on one hand as you mentioned not recommended for first JV. on the other hand if it`s more efficient it`s like a wasted opportunity not to do it. well, assuming they might be interested, I`ll just have to make a decision here.. Thanks.