6 Questions For…Edna Keep
Edna Keep, founder of 3D Real Estate Investments Ltd answers your questions on the pros and cons of joint venture investments.
- Q: Why are more investors looking at joint ventures for their property deals?A: For the same reason we started investing with a Joint Venture partner…we were new to the business and wanted to grow quickly and get in on the growth that was happening in Saskatchewan. We were unsure of the best areas to invest in, and we wanted to shorten our learning curve. We started by being the money and/or mortgage partner. After we established ourselves we started bringing in the Investors to provide the capital and qualify for the mortgages.
- Q: What are the primary advantages to Joint Venturing?A: The primary advantages to the real estate investor are 1) Access to capital, 2) Increased leverage and 3) Greater success in mortgage qualification. Participating in a JV can be an ideal investment strategy for someone who wants to partake in the advantages that investing in real estate has to offer such as capital appreciation, mortgage pay down and cash flow, but who lacks the time and/or experience to invest on their own.
- Q: What makes an ideal JV partner?A: The ideal JV partner has access to capital (the more the better), has provable income (preferably T4 income), a strong balance sheet, good credit and has a basic understanding of how investment properties operate.
- Q: Where do some JV investors get it wrong?A: Some of the most common mistakes include, but are not limited to, no JV agreement (the best way to avoid conflict is to ensure that a comprehensive JV agreement is in place at the outset), poor property selection, not understanding cash flow, poor management, poor communication and not having an exit strategy.
- Q: What is the key to success in a JV partnership?A: The most important aspect to a successful JV partnership is regular communication. Some of the ways that work for me are managing expectations up front, online access to the JV bank account and quarterly written reports.
- Q: What tips would you give to first time JV investors?A: In order to attract JV money, you need to focus on two things: (1) experience and (2) track record. JV partners want the best prospects for success, and the best way to ensure that is to partner up with a JV investor that has both experience and a proven track record.