5 Questions to Ask Before Starting a Joint Venture

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A real estate joint venture is a deal between multiple parties to work todevelop a real estate project
July 20, 2019 Investment Decision

A real estate joint venture is a deal between multiple parties to work together and compile resources to develop a real estate project. Most large projects are financed and developed as a result of real estate joint ventures. The basic aspect of this agreement is that the landowner contributes his land and the real estate developer undertakes the responsibility of obtaining approvals, property development, launching and marketing the project with his financial resource.

Thing is joint venture is not as simple as just putting your land on the market and waiting for offers from eager real estate companies to roll in. If you have any hope that your profit will go smoothly, you’ll have to sit down, take a hard look at your land, and ask yourself a few questions.

Though some steps of the joint venture process seem fairly straightforward—find a real estate agent, set a list price—there are a number of lesser-known factors that play a big role in whether your land gets procured, and how much you’re going to fetch for it.

To help you enter the joint venture process fully prepared and with your eyes open, here’s a list of five essential questions to ask yourself to get started.

  1. Can I afford to go for a joint venture?

Although you’re going to cash a check when your land gets signed, as the proverb goes, it takes money to make money. Some joint venture agreements are obvious, like commissions to the listing and real estate agents, but there are a number of other expenses to take into consideration.

  1. What do I need to disclose to developers?

As much as you want to present your land in the best light, you should also be prepared to disclose some of your land’s flaws.

Though disclosure laws vary by city—landowners should disclose any known facts about the physical condition of the property, existence of dangerous materials or conditions, lawsuits or pending matters that may affect the value of the property, and any other factors that may influence a developer’ decision.

  1. Which portion should I claim for my land?

You must have the opportunity to ask whatever you think you deserve. But in this circumstance, this varies upon the area where your land is located. The landowner usually gets between 25 to 40 percent share in the built-up area, and the rest goes to the builder. Moreover, there is a difference in the profit-sharing basis of the agreement. In a highly commercial area or residential area complemented with park, lake, wide roads, shopping mall, reputed schools, colleges, hospitals, and other modern amenities, landowners are more likely to enjoy a great benefit for their lands. It may be even up to 60% of the total benefits. Besides, the developer pays a premium to the landowner (not the total value of the land, just some premium) when the land gets signed.

  1. Should I bear pile integrity test cost?

Developers are not likely to take responsibility for the pile integrity test. Even If they do it, they charge for it from the landowners. Usually, real estate agents recommend landowners to make it sure from their ends.

  1. What do I have to leave behind when my land is procured?

While it’s ultimately your decision what items you leave behind for the developers, real estate companies are more likely to go for negotiation only on the vacant land. If there is any structure on the land, you have to find dismantling contractors. They will assist you to dismantle the property that is no longer to use and will provide you with a scrap value of your property. If you don’t know any dismantling contractor, no worries! Some developers may assist you to find one, but surely are unlikely to negotiate with them about the scrap value. You will be supposed to negotiate with the contractors and they will provide you the scrape value for your structure.

As gainful it may be, it’s not without any limitations. The landowner, in these cases, needs to sit tight for quite a while till the development is finished. The variety may be on different grounds as well. The idea of the structure might be commercial or residential; the level of the advantage of land proprietor might be extraordinary and the season of passing on the advantages or venture period may contrast. The form of arrangement will choose the statutory commitments emerging out of it. Once you choose a renowned real estate developer, you may rest assured about on time handover, quality construction and so on. So, the main challenge for you is to find a trusted developer company.