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Joint Venture Variables To Negotiate

Chapter P

Perspectives On Building An Agreement
Venture Variables - What You Negotiate

Joint Venture Variable Checklist:

Perspectives On Building An Agreement

When two partners are building an agreement, the variable components to be negotiated are the factors which most critically affect whether the agreement is "fair", or perceived to be "fair."
Hopefully you're negotiating these items and coming to some agreement before you buy the property, because you become more vulnerable whenever you have to do something in a hurry.

If the two partners are relatively knowledgeable real estate people, you'll probably have different attributes or complementary skills so that you can join forces and thus reach the same goals. If
Debbie or Dan Has-A-Deal is working with a Money Momma / Money Man outside the real estate community, that partnership venture arrangement will probably be quite different. In all likelihood that money partner doesn't want to know too many of the details, and may not want to be bothered with them at all. The Money Man may want just the results and positive reports along the way.

In any case the negotiated agreement has to provide that each partner receives the particular benefits that make sense for them individually. Sometimes it may help to use the "T bar" form to help list and sort out the benefits. Peter Fortunato recommends using this process whenever possible, since it graphically clarifies which partner is getting what. You and your partner can decide who wants what, and what you personally can give up easily in order to make the arrangement work for all parties. Agreements can be adapted as needed. Agreements are also broken, since any contract can be the subject of litigation. The processes outlined in these materials are designed so that you can avoid the agony and expense of dueling attorneys.

The important concept is fairness. The reason to be fair is that if you're not, it will come back to haunt you. Have any of you ever been in a situation where things were structured so that it was all going one way, not yours, and you really felt it was unfair? It may not have happened yet, but it's going to happen sometime or another. For instance, if the money person is too demanding and effectively squeezes all the incentive out of the operating partner, why wouldn't the operating partner feel justified in walking and leaving the money partner in the lurch with all the work incomplete or poorly handled? The operating partner needs the incentive to do the job. And the money partner needs to be treated fairly as

Let me give you a real life example that happened to me. A number of years ago some neighbors and I, a husband and wife team, went into a joint venture arrangement. Initially we bought the
property to hold as a rental, because at that point in time there was almost certain appreciation in our marketplace. Well, we held it for three or four years but then the real estate market just went down hill. At that point we decided to lease-purchase the property because we needed to sell it. We found an interested lease-purchase buyer fairly quickly. But next the initial lease-purchaser lost his job, so he couldn't qualify for a regular loan. What do you do in a case like that? You adapt your goals with the property and keep them on because they are good tenants and they love the place. Or, you buy some vacancy and try to sell again. My partners
wanted to sell, so we bought vacancy, put it on the market and got another set of lease-purchasers.

Joint Venture Variables to Negotiate - Chapter P (continued)

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