Real Estate Joint Ventures

The Canadian Investor's Guide to Raising Money and Getting Deals Done

Don R. Campbell, Russell Westcott

• Publisher: Wiley
• Year: 2012
• Print ISBN: 9780470737521
• eBook ISBN: 9780470676110
• Edition: 1
• Topic: Business
• Subtopic: Real Estate
• Index: Business

A step-by-step guide to attracting all the investment funds you will ever need for your next real estate transaction

As the sales of Real Estate Investing in Canada have proven, Canadians are looking to real estate investing to build wealth. In his bestselling book Real Estate Investing in Canada, Don R. Campbell introduces the Authentic Canadian Real Estate (ACRE) system, the first system of its kind to show ordinary Canadians how to profit from investing in residential real estate. Told as a narrative, a typical Canadian couple named Richard and Emma successfully buy their first properties and now are ready to leverage their equity into more properties. In order to achieve their goals, they are introduced to a joint-venture specialist and, with his guidance, they learn how joint-venture partnerships work and secrets and strategies for acquiring new properties that only the pros know.

Richard and Emma build their portfolio -- and their confidence -- and so they leave their jobs to focus on real estate investing full-time. Following a proven 7-step system, Richard and Emma are equipped with the information, strategies and motivation they need to go to the next level by explaining:

• What are joint-venture partnerships and how do they work to create win-win relationships
• Wealth attraction principles-how to become a money magnet
• How and where to find joint-venture partners-marketing and lead generation--and separate the wheat from the chaff
• Structuring a joint venture deal-building a team of experts and the due diligence process
• Legal structures and agreements, including tax implications
• 19 landmines to avoid in joint venture partnerships
• Following up with current joint venture partners and duplicating success

The appendices offer valuable time-saving checklists, forms and worksheets, as well as advice on paper flow and time management.

6

Workshop: How to Choose the Right JV Partner

Successful people are always looking for opportunities to help others. Unsuccessful people are always asking, “What's in it for me?”

—Brian Tracy

Workshop Overview

Presenter: Russell Westcott

I took a look at what some of you are doing to generate new leads on prospective JV partners—good work. I've also heard that some of you now have leads, but you are undecided about moving forward with them. Your timing is impeccable because that's what we're going to focus on today: how can you filter leads so that you're not wasting time on JV deals that won't work?

There are two particularly negative types of investor-wannabes:

1. Those who do not share your investment goals.

2. Those who don't bring what you need to the deal.

Don't get me wrong. Sophisticated real estate investors working with money partners know that their goal is to create future wealth with their partners. They also know that they cannot work with everyone who knocks on their investment door, and they know that time is the investor's greatest resource. You can lose money on a deal and make it up later. You cannot recoup wasted time. That's why it is so important to learn who you can work with—and who you can't.

Narrow the JV Field

A lot of novice investors think they can “play the JV field.” I respectfully disagree with that approach. Yes, investing with other people's money is a surefire way to build a real estate portfolio and create win-win relationships with JV partners, but this is a serious business and must be pursued with the appropriate checks and balances. Investing with JV partners carries serious risks, and you do not want to burn financial and relationship bridges. To successfully invest with JV money, we encourage you to narrow the JV field using tried-and-true business filters. Your goal is to focus your attention on partners who share your business plan and vision.

Let's say you've successfully “turned all conversations to real estate” and a few individuals have asked for more information about investing with you. Perhaps a physician who is a colleague of your family doctor has sent an e-mail to you requesting more information.

Following the system advocated by sophisticated JV investors, a system we discussed in Workshop #5, you will follow up the e-mail with more direct communication. Because this is a Level 2 contact who is approaching Level 1 status, you might send this individual a copy of Real Estate Investing in Canada 2.0 and a letter that opens the door for a face-to-face meeting. Depending on your relationship with that individual, you could send a Follow-Up Letter like the one Richard and Emma shared at Workshop #3 (see Appendix C). That's a good letter to send to someone when you are “testing the water” to gauge their interest.

My key point here is the importance of follow-through. You want to “tell, not sell,” but you can't wait for other people to open the business door for you. Since your investing system emphasizes that talking about something is not the same as doing it, you must always follow up any written correspondence with a phone call or e-mail that includes a specific call to action expressing your interest in continuing a dialogue about real estate investing.

Susan: This is exactly where I'm at with a dentist who is a friend and business colleague of my daughter's orthodontist. They work in the same medical business complex. I haven't invested with either of these men, but both are interested, and I feel like I'm on the verge of something really important to the long-term health of my business. I opened the door to an investment conversation by sending them a very brief letter about what I do, along with a copy of Real Estate Investing in Canada 2.0.

Now it's time to follow that up, but I am worried that I'm in over my head. What if I can't deliver a deal that works? What if this person isn't someone I want to work with? If I can't strike a JV deal with this dentist, does that compromise my reputation with every medical practitioner in the building? I was there just last week, and I counted 12 different practices in that office building. This has the potential to be huge, or disastrous.

I understand your fear, Susan, but believe me, this is all good news. Once you get to this point, it is important to acknowledge the three key things you are doing well. First, you are following a systems approach to real estate investing with JV partners. Second, you are building relationships, and third, you are demonstrating follow-through. Congratulations! You are sticking to the fundamentals of JV investing and putting yourself on the path to success.

Now we'll address Susan's concerns, which are not unfounded. Let's say her lead takes her up on her call to action and wants to discuss an investment opportunity at a face-to-face meeting. Well done. You should celebrate your initial success, but exercise caution. While Don Campbell and I are big believers in celebrating steps along the road to success, we worry when less-sophisticated investors get caught up in the emotional momentum of progress. It's great to generate leads, but the real work is just beginning. There is still a lot to do, and future progress means more of the right action now. For Susan, that probably means sending a more detailed letter along with a Potential for Relationship questionnaire (see Appendix D). For now, let's skip ahead and say a potential money partner says he wants to talk about making an investment deal.

Filter Potential Partners

At this stage in the process, the action you need to take is all about filters. The wonderful truth about Level 1 contacts is that once they express an interest in working with you, they are less likely to fish and cut bait. As long as you are respectful of their time, they are less apt to waste yours. Better yet, you can narrow the field of prospective JV partners by using a tested filtering process that will help you prescreen your leads and zero in on the “right” JV partner.

But there is a flip side, too. The nasty truth about Level 1 contacts is that even though your best leads come from this group, some of the people who express an interest in doing business with you will never follow through. Others may have the resources it takes to follow through, but may prove to be individuals with whom you do not want to invest. Those problems are more pronounced with Level 2 and 3 contacts, but you should know it's a potential problem at Level 1, too. Here's what you do about it.

Prescreen your leads

To increase your chances of spending time on prospective investors with the most potential, sophisticated investors prescreen every lead, regardless of whether they are generated by a Level 1, 2 or 3 contact. This typically happens before a face-to-face meeting, and the goal is clear. Since time is always an issue, you want to spend your time on the leads that are most likely to generate deals. If an investment deal is unlikely to occur with a particular partner, why pursue that aspect of your relationship? Sophisticated investors say it's like leading someone on—and who has time for that?

The prescreening process also respects yo...

Table of contents

• Cover
• Title Page
• Copyright
• Meet the Authors
• Meet the Real Estate Investment Network™
• Introduction
• Workshop: The Potential of Joint-Venture Money
• Tutorial: What Is Your Personal Belize?
• Bonus Handout: Insights from a Veteran Investor
• Workshop: Systems Make JV Success a Priority
• Tutorial: Relationships, Systems and Fundamentals
• Bonus Handout: Insights from a Veteran Investor
• Workshop: Learn the Principles of JV Wealth Attraction
• Tutorial: Practice the Principles
• Bonus Handout: Insights from a Veteran Investor
• Workshop: How to Find JV Investors
• Tutorial: Recognizing JV Investment Gold
• Bonus Handout: Insights from a Veteran Investor
• Workshop: How to Generate JV Leads with Superior Marketing
• Tutorial: Market Your Business Better
• Bonus Handout: Insights from a Veteran Investor
• Workshop: How to Choose the Right JV Partner
• Tutorial: How to Write a Letter of Intent
• Bonus Handout: Insights from a Veteran Investor
• Bonus Handout: Insights from a Veteran Investor
• Workshop: Secure Commitment—Move Your Deal from Talk to Action
• Tutorial: Study a Joint-Venture Agreement
• Bonus Handout: Insights from a Veteran Investor
• Workshop: How to Structure JV Deals
• Tutorial: Review the Fundamentals of a JV Agreement
• Bonus Handout: Insights from a Veteran Investor
• Bonus Handout: Insights from a Veteran Investor
• Workshop: Closing the Deal—How to Avoid Partner Pitfalls
• Tutorial: The Top 5 Steps to Avoiding Landmines
• Bonus Handout: Insights from a Veteran Investor
• Workshop: Duplicating Success
• Tutorial: Taming the Paper Tiger and Using Accounting Strategies that Work
• Bonus Handout: Insights from a Veteran Investor
• Workshop Wrap-Up: Richard and Emma Look Ahead
• Bonus Handout: Insights from a Veteran Investor
• Appendix A: Property Goldmine Score Card
• Appendix B: REIN Property Analyzer
• Appendix C: Prospective JV Partners—Follow-Up Letter
• Appendix D: Potential-for-Relationship Questionnaire
• Appendix E: Expression of Interest Letter
• Appendix F: Rental Properties Monthly Statement
• Appendix G: Rental Properties Monthly Statement—YTD Summary
• Index