Everything around us is witnessing a major boom, in the real estate sector in most of the countries. This in turn has given rise to a number of real estate joint ventures agreements, getting signed between real estate developers and landowners. This process usually takes place between landowners who have mostly inherited their properties, and have no insight into the legal work involved. These landowners get involved in joint venture agreements with real estate developers and many a times find a lucrative deal for their land. The lands which were locked away for many years with no signs of the development get transformed when these development projects take off.
There are many good business and accounting reasons to participate in a real estate joint venture. Getting a good deal with a business that has complementary abilities along with resources, such as finance, technology makes good sense. Let us now find the underlying cause of some of the reasons partnerships formed by joint venture are becoming popular in day-to-day life.
A joint venture is a profitable alliance between two or more parties for a specific project
Partnerships with joint venture real estate investors can be similar but in fact can have significantly different applications for those involved. A partnership usually involves in a continuous, long-term relationship, whereas a joint venture is based on a single business project. Both the parties who enter in joint ventures, mostly gain individual benefits, and share the project objective. This can be taken into consideration for a product or intellectual property rather than collated profits.
Equal Profit Distribution
The key point taken into consideration while getting into a partnership with real estate development companies is how each party should split profits that they make from the same venture. The members should be compensated equally and fairly to let both parties work in harmony.
The real estate investment companies’ do require an agreement, which needs to specify the exact amount of capital contributed from each member. Additionally, it should also specify when this capital is due.
Proper Management and Control
The real estate joint ventures agreement is expected to specify in details, the exact structure of the agreement and the responsibilities of both parties regarding the management of the project.
Entry and Exit mechanism
It is already discussed above how both parties interested in build to suit commercial estate can get into an agreement. However, it is equally essential for an agreement to detail how and when it will end. Usually, it is in the best interest of both parties to make the dissolution of a joint venture agreement as economical by possibly avoiding legal fees. The agreement must also list out all the events that, might allow both the parties to trigger a premature dissolution.
A joint venture is an excellent opportunity to enhance the overall performance of the business. Whether it is for buying, selling, or just getting started, this teamwork strategy is advantageous for several reasons. The real estate development companies combine complementary strengths for the good of a real estate business. A joint venture provides experience for real estate developers, which may be of fruitful assistance in future endeavours.