“Control Without Ownership” series - Equity Joint Ventures (Part 2)
The Control Without Ownership investment system removes the management conundrum from the real estate investor who wants the benefits without the headache.
The structure of this plan involves “joint ventures.” Joint ventures are NOT partnerships. Joint ventures provide each party with what are called “severable interests.” This means that both parties have specific duties, obligations and benefits which are separated by documents and security agreements that have built-in statutory remedies.
The key principal of this system is to have a vetted managing joint venture partner involved. Character is key. Second is a proposed investment that provides the benefits that both parties seek.
Let’s take a case study from my own investing activities…
I pay for the lead generation (marketing – direct mail and Google AdWords) for a local contractor/manager in my area whom I know to be trustworthy and capable.
Through our marketing, he comes up with a possible deal and brings it to me with photos and a summary of the property and seller’s needs and expectations (all done by email – I don’t need to personally inspect the property or talk to the seller).
If the numbers work, a deal is then struck with the seller. My contractor/manager has provided me with the acquisition and rehab cost figures – I’ve determined the property will cash flow well.
The contractor/manager handles all aspects of the rehab, tenant application and screening and ongoing management. He receives a specified percentage of the net cash flow and the long-term equity in the property – he has “skin in the property” – unlike a management company that only cares about taking money off the top.
The percentages are negotiable and are based on how much money the contractor/manager puts into the deal and how many deals we have done.
The bottom line is that I have a joint venture partner who is incentivized to provide accurate numbers, solid rehab and management. If he fails, it comes out of his pocket on the cash flow and his equity also suffers.
I don’t expect you to understand all the details – I just want you to understand the concept. In our Freedom Founders mastermind, we go into much deeper discussion of joint venture structures and provide the documents and due diligence for our members.
If you feel you can benefit from the knowledge and connections our group provides, then I’d like to schedule time for us to chat one-on-one. Learn more.
David Phelps, D.D.S.
(Retired and loving it…)
P.S. I can do as many of these joint venture structures as I like – and with different managing partners in different geographic areas. My interest is secured by the property, and I always have a safety margin of about 30% equity in the unlikely event the managing partner completely fails (which has never happened). If being able to scale and “control without owning/managing” sounds intriguing, let’s talk…
Dr. David Phelps DDS, a former practicing dentist, now spends his time helping other dentists and physicians create wealth and passive cash flow through real estate investing. You may read more about him at FreedomFounders.com.