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  A real estate joint venture deal refers to the collaboration between two parties to develop a real estate project, with the intention of sharing the profits that come from it. 
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The parties involved contribute the resources they own to complement what the others have provided. Taken together, these resources make it possible to develop a real estate project.  Here’s an example of a real estate joint venture: a landowner may want to build residential apartments on her land and sell them, but may not have the funds she needs to do so. She could join forces with a property developer that has the funds and expertise required to build on the land and share profits with them when the apartment blocks are sold. This is a simple example. In reality, there could be several parties involved in a real estate joint venture. A single project may have an architect, a builder, a procurements person, and a financier working together to develop the property. They all contribute their resources, in terms of relevant skills or funds (in the case of the financier), to bring the project to fruition.

The Benefits Of Investing In A Real Estate Joint Venture Deal

The great thing about real estate joint venture deals is that it delivers benefits for everyone involved.  Let’s say there’s a joint venture involving a landowner and a property developer. As a participant in the venture, the landowner doesn’t have to worry about finding funding for the development of their land. They could even receive a portion of the profits that accrue to them before the property is sold.  Likewise, the developer doesn’t have to buy land outright before commencing the development. This means that they can shrink the initial cost of the development, and work on it at a greater speed.

Steps To Investing In A Real Estate Joint Venture In Nigeria

If you’re interested in investing in a real estate joint venture in Nigeria, here are the steps you need to take to make it happen.

Assess The Value You Bring To The Table

As we’ve explained, the parties in a joint venture all contribute something to the success of the project. Yours could be land, or you may be an experienced builder or architect whose skills are vital for making the development come alive. Or maybe you’re looking to invest money in real estate. Whatever you’re contributing, ensure that it’s something that’s sought after and relevant to a real estate project. 
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Look For Joint Venture Partners

Next, you’ll have to look for people who have the other resources needed to develop the property. You may ask friends, family, or other contacts whether they or anyone they know is interested in working with you. Reach out to people in the real estate business. Real estate agents can be especially helpful, as they could aid you with their professional networks. 

Align Your Purposes

It’s important that you’re on the same page with your would-be joint venture partners. This will save you from disputes and disappointments during the development, selling, and profit-sharing stages. Discuss with them to ascertain what they want out of the deal, and ensure that their aims are in line with yours.

Sign A Joint Venture Agreement

A joint venture agreement is a document that contains the various rules governing the venture. These rules include the ownership rights and contributions of each member, assignment of management responsibilities, how profits will be shared, and conditions for ending or exiting the project. Once signed by all parties involved, it becomes binding on every one of them. So it’s crucial that you understand the document’s contents before appending your signature to it.  

Register The Venture

Real estate joint ventures are typically structured as a Ltd or Limited Liability Company (LLC). Its members include at least one operating member (who contributes their skills) and at least one capital member (financier). The limited liability structure ensures that losses accrued from the business remain limited to the capital invested in it.  However, joint ventures can also be structured differently from an Ltd or LLC. 

Execute The Deal

Upon signing the Joint Venture Agreement, each party involved in the project will be expected to deliver on their part of the deal. They will collaborate in the development of the property (or properties) in question, whether it’s apartments, malls, offices, warehouses, etc. The signed agreement ensures that members who are wronged in the process of the project’s execution can seek legal redress. 

Exit With Profit

When the project has been completed and sold, each party to the deal should receive their share of the profits, as stipulated in the joint venture agreement they signed. 

Final Words

Real estate joint ventures allow people interested in the real estate business the chance to share development costs – and profits –with other investors. If you would like to make money from selling property, this could provide you with an affordable way to do so.    Featured Image Source: Forbes
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This article was first published on 11th February 2022

ikenna-nwachukwu

Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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