Things You Should Know About Real Estate Joint Ventureby Paul Wright Tax Accountant Toronto - A Simple Checklist for Ch
In case of small real estate projects the developers are able to manage them solely but a real estate joint venture becomes indispensable in case of large projects with huge amount of investments. What is joint venture? It is a venture where two or moiré parties combine their resources for accomplishment of any task in mutual agreement. It would be good learning about what it involves.
Partners of Real Estate Joint Venture
Joint ventures in real estate feature two types of participants and partners in them. One of them is the developer or operator of the real estate project who is concerned with actual designing, construction, and development of the project. The other one is one or more of the joint venture real estate investors who takes care of the financial aspects of the project providing the necessary capital and may be individual or an organization. Usually the financier partner does not get involved in the development process. Usually the companies located away from the place of the project assume the role of investor leaving the implementation part with some local experts or agencies.
Build to Suit Commercial Real Estate
In essence; joint ventures are build to suit commercial real estate with operating member taking care of the physical part of the work and capital member taking care of the financial aspects of the work. This ensures that the project is not stranded midway due to paucity of funds. Usually the operating member is an expert in construction and development works and is responsible for the day to day operations as well as management of the project. Common practice is to make a seasoned developer the operating member in the real estate joint venture. On the other hand the capital member provides initial funding or at times the funding for the entire project.
Responsibilities of the Partners
In any real estate joint venture the partners have common responsibilities for profits, losses, and costs associated with the joint venture. However the venture itself has its own entity separate from the interests of the partners concerned. While the real estate development companies or individuals as partners are responsible for the quality and timely completion of the project and also expediting the sale process; the investor has the responsibility of providing steady fund flow at every required stage of the implementation of the project.
Clear and Precise Contract
It is imperative that in any joint venture there would be a contract concluded between the developer and the real estate investment companies. The terms and conditions laid down in the contract should be simple, clear, and precise in order to prevent any chances of confusion creeping up. Especially important are the determination of shares in the profits and losses incurred in the project and also clear terms following which either of the party can withdraw from the deal or the project. This will be very effective in preventing unnecessary litigations arising out of the conflict of interests between the parties.
Above all; the real estate joint venture and its success depends on the trust and goodwill of the partners and their transparent dealing with each other.
Created on Apr 9th 2018 01:41. Viewed 236 times.