Jan 4, 2019
18 Views
0 0

Building Up a Successful Real Estate Joint Venture

Written by

In recent times, joint ventures have become the order of the day in real estate industry. In order to build up such a venture the investors and developers join hands to construct a project and the collaboration runs from the inception till logical end of the project.  However, it is not the easiest of the propositions building up successful real estate joint ventures and there are several aspects to take care of. First of all; it is necessary learning what the real estate joint venture is.

 

Features of Real Estate Joint Venture

Real estate joint venture today plays a crucial role in the making of large projects. Two aspects of the joint venture are the development and financing of the project. It is based on agreement between two or more parties combining their resources in accomplishment of the given task. In the venture professional expert developers partner with the capital investors to complete the project qualitatively in time. Each of the partners has its role chalked out and has to take care of the responsibility entrusted in the project without overlapping the domain of the other.

 

Role of Joint Venture Real Estate Investors

Basic role played by the joint venture real estate investors is to provide the capital for completing the venture and keeping the cash flow uninterrupted throughout the project. Such investors often own plots of lands on which they want to build up construction works but are constrained due to distance factor or lack of technical expertise. In such case the investors join hands and enter into an agreement with an expert developer to complete the project in time where the investors take care of the financial aspect and developer partner takes care of the physical works.

 

Two Components

Thus in every real estate joint venture there are two components. One of them is the real estate investment companies whereas the other one is the developer company. In industry terms they are called the capital member and operating member respectively. The former is an accomplished financier whereas the later one is an accomplished developer company. Developer should have the ability and expertise to source, manage, acquire, and develop the project. On the other hand the capital member contributes large part of the finance even before the project commences.

 

Clearly Defined Limitations is Necessary

In a joint venture it is absolutely expedient that the role played by each of the partners is clearly demarcated and neither overlaps or lags behind in playing their respective roles. This is especially important for build to suit commercial real estate projects as the success of the project is largely dependent on such aspects.

 

While it is necessary keeping a vigil on the utilization of funds and financial aspects of the project, there should be no undue interference on the part of the capital partner in the task carried out by the real estate development companies that are professional experts in the field. Mutual trust and reliance are vital for any successful real estate joint venture where the partners perform with transparency, dedication, determination, and discipline for success of the project.

Article Categories:
Finance

Leave a Reply

Your email address will not be published. Required fields are marked *