While property has long been a popular and favourable asset, the large amount of capital required has traditionally put it out of reach for most investors. However, recent years have seen major changes that have served to level the playing field, and the routes into real estate investment are wider and more varied than they have ever been before. One such route involves investing into residential property developments alongside the developers and builders via joint ventures.
How Does a Joint Venture Work?
Joint ventures (JVs) are a means of investing in residential property, providing a way of bringing together a variety of expertise and different disciplines, as well as a substantial amount of capital.
A JV serves as an arrangement between two (or more) parties that seek to cooperate in order to achieve a common objective. These arrangements are often deployed in property development and can provide value for all concerned parties.
Experienced investors in real estate developments, such as Mario Carrozzo, know that a JV can be used to finance both small-scale developments by independent builders and huge, multi-million-pound projects – and everything in between.
What Are the Likely Investor Returns?
Just as with any form of investment, putting funds into a joint venture does not guarantee a return, and the investor’s capital is at risk. However, property remains such a popular asset class in which to invest largely because – over time – it’s value will likely increase.
Investing as early as possible in the development process can be an effective way to maximise potential returns, which joint ventures facilitate.
When it comes to the timescale regarding seeing any returns, this will vary from project to project and will depend on a variety of factors such as the size of the development and the specific builder undertaking the work. However, it’s worth bearing in mind that target development periods tend to usually be between 18 months to 2 years.
What Happens if the Joint Venture Makes More Money than Forecast?
As a JV is essentially an equity investment, if the project generates more money than expected, investors could potentially reap a higher return. The amount returned to investors is a percentage of the profit made that’s equal to the proportion of equity held by the investor.
Take a look at the embedded PDF for information about what may happen if a joint venture doesn’t achieve its target returns.
