The Foundation of a Successful Real Estate Partnership is the Joint Venture Agreement.
A Joint Venture (JV) is a great way to invest in real estate, because it leverages the power of teamwork. Usually there is a Money Partner (also referred to as a ‘Resource Partner’), who provides the funding, and a Knowledge Partner (also referred to as a ‘Working Partner’), who finds, negotiates, and manages the deal. The bedrock of a good JV is the written agreement that spells out of the terms of the partnership. In this blog post, you can read about using template documents to create a Joint Venture with reduced legal fees.
Getting a Lawyer to Review the Paperwork of Your Joint Venture
Over the years I have worked on and drafted quite a number of Joint Venture Agreements (JVA), because I’m an Alberta real estate lawyer who loves Creative Investing Strategies. Some people are comfortable drafting their own JVAs—especially graduates of my Rapid Cash Program and experienced JV investors. However, for most folks, they want to get our help in finalizing that JVA. I would say the percentage is about one third DIY and two thirds where people are just more comfortable with a lawyer helping them out.
When someone wants some help with a JVA sometimes they say, “I’m okay with the agreement generally, but I need help with a few clauses.” Or sometimes they say, “I’m attaching my template JVA, can you please give it a quick review?” I used to help out with these requests, but I’ve decided that neither of these scenarios are completely satisfactory. Why?
The reason is that when a lawyer is asked to comment on just a few paragraphs of a document, those paragraphs can’t be separated from the rest of the JVA. Changing one paragraph in isolation may adversely affect other paragraphs.
And when anyone sends me their template JVA and asks for a “quick” review, really, there is no quick review. I have to read the whole document, think about it, analyze it, and then give advice and opinions. Why? Because even small changes make big differences. That approach is sometimes a surprise to clients. Even if I might have originally drafted a template, people always have to customize and modify them; that’s just how templates work. So, I always have to go over JVAs with a fine-tooth comb.
Conclusion: is that I can neither review just a couple of individual clauses nor skim over a template because of how the details of an agreement work as a whole. Even with someone using my own templates, it’s a brand-new job every time; I have to start at the start, and it takes a lot of hours. No matter which way you cut it, in order to give proper legal advice, I end up having to do a complete review and/or re-creation of a JVA.
Even for folks who want to create their own template from an existing one, it’s always very valuable to have a lawyer’s help with the first few deals. Eventually, some investors are able to go fully do-it-yourself. I’ll talk more about that later. First, let’s look at what I did to come up with the ultimate template for in-house use at my law firm.
Creating a Joint Venture Agreement Template That Works Efficiently
I brainstormed the situation and decided the answer was to revisit the whole notion of JVAs. To overcome the difficulties described, I needed a brand-new template. A JVA that would take the best parts of existing documents, simplify some of that dense legalese, and just generally create a better, more readable template. The theory was that if I created such a document, then it could way more easily and quickly be applied to any individual’s JV situation.
I needed a new in-house JVA, which would not be one that had circulated round the world and been subjected to the editing of the Internet at large. Sorry, we won’t be giving this one out, folks!! As I mentioned earlier, once any JVA is out of my hands, I have no way of knowing if what comes back is the original without doing a thorough review. Instead of putting all that time into review and analysis of something someone sent us, I can put time into productive discussions about any individual’s JV circumstances and then way more quickly—and less expensively—get a JVA completed.
That was the theory. Then it was time to get started on the creation of a brand new JVA. So, over the course of six months, I combed through a giant file full of JVA precedents and looked at the various templates that have accumulated over the years. I examined individual topics like, “Additional Financial Contributions” or “Management” or “Settling Disputes” and compared how each template JVA dealt with or, in lots of cases, didn’t deal with all the important JVA issues.
In the end, I created a brand new JVA that is extremely detailed, with all the potential clauses, and using language focused on clarity and ease of understanding. It’s a tool that makes my job as your lawyer easier, which saves you money. Next was to see if anybody liked the brand-new document…
Crafting Personalized Joint Venture Agreements in Less Time
We got great reactions to the new JVA template! Now when I do JV consultations, I spend way more time on in-depth discussion and way less time on drafting.
In this process, I have had one of those basic lessons reinforced: everyone’s circumstances are different. Interestingly, I kind of thought that the brand-new JVA would fit more people’s circumstances without major amending. Wrong! Everyone has their own take and spin on how they want their JV to run. Templates are great, but, when you get right down to it and have a full discussion and consultation, there are usually substantial changes to be made. And that’s fantastic!
I know my JVA upside down and backwards so I can make changes quickly and create a custom JV tailored to your situation at a reduced cost. You get the JVA you want and I get a great sense of pride in helping you achieve your goals. A definite win-win!
DIY Joint Venture Agreements for Creative Real Estate Investors
If you’re the sort of person who likes to do things yourself, then check out my Booster Pack for Creative Real Estate Home Study Kit, which has JV templates, Letters of Intent, and checklists you can start using right away. Better yet, look into the complete Rapid Cash Program (RCP), which contains not only all the material from the Booster Pack, but also a suite of other Creative Strategies that you can use to make money in any market.
Now, if you’ve never done a JV before, you should still get a lawyer to review your documents for at least the first deal and probably the first several. With experience, however, investors have been able to structure their own JVAs based on my templates. Although different than the master template I use in-house, these templates are very useful.
Buy the Booster Pack for Creative Real Estate now:
For questions about Joint Ventures or to book a consultation with an Alberta lawyer, please get in touch!