Investors are typically drawn to real estate as an investment due to the potential to yield significant profits.
In fact, according to the Grand View Research website, the real estate market is predicted to generate a global revenue worth $4,263.7 billion by 2025. The appreciation rates of real estate investments make the venture even more appealing.
However, it is tough to find a real estate investor who is fully self-sufficient. While you might have the land, you might lack the financial capability to invest in your land and vice versa.
Walking the joint venture real estate development path can help you and your investment partner exchange complementary strengths to make your dream investment successful.
Here are a few great reasons to consider joint venture real estate development:
In some situations, you might have the down payment for your dream investment but have a low credit score that makes it tough for you to land a loan at favourable rates.
With a joint venture, the investment partner who has the stronger score can acquire the loan while the other one deals with manning the development of the property.
In case you are the latter, then including a property development company into your plan can help you both identify solutions to cut costs as property developers, according to Development By Impression.
On the other hand, you might have a credit score strong enough to land a loan, though you lack the down payment. Your investment partner can offset the cost in this case. While there is the option of exploiting the ‘no money down’ policies that most lenders have, the additional benefits of working with an investment partner can be quite inviting.
The pivotal role that credibility plays in real estate cannot be overstated. As long as customers trust and respect your business, the chances are that you will continue to thrive and build a strong customer base. Unfortunately for new entrants into the real estate field, they might struggle to build enough credibility in the eyes of their target audience.
If you find yourself in this situation, partnering with a well-established investor can help you take a shortcut to building your own credibility.
Since customers will perceive you as credible as your investment partners, you can tap into a wider market than you couldn’t have by yourself. When developing a new piece of property in the future, customers will still be more likely to view your brand as credible and this will increase your rates of success.
Widen Your Market
What if both you and your investment partner have gathered enough credibility to thrive on your own? Some investors tend to run like a monopoly in certain real estate markets. This means that you might have to struggle when trying to enter in such markets, and the chances of your investment collapsing can be quite high due to the high level of competition..
As the saying goes, If you can’t beat them, you might join them as well. Joining forces with investors of equal or higher market share can help you reach out to a market that previously seemed impossible to penetrate.
This is a win-win situation as your investment partner also gains access to your market share, and you might have a fighting chance to turn your partnership into a monopoly in your target market.
Gain Valuable Expertise
A real estate investment typically calls for you to channel a significant amount of funds. As a result, using trial and error as an entrant into the market can be detrimental to your investment as losses are almost bound to occur. However, it takes time to build the expertise needed to venture into this field with confidence.
While working with a more experienced investment partner, you gain expertise by learning from them. As noted by Inman.com, if you can build a strong relationship with them, your investment partner can let you in on ways to cut costs, increase profits and avoid common hiccups and pitfalls.
The idea of sharing real estate profits with a joint venture partner might be uninviting to some. However, the resulting benefits often outweigh the potential loss of profits, especially seeing as you share any risks or incurred losses.
Leveraging a joint real estate venture can definitely have a lot of benefits if it’s done the right way.
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