Benefits of a Joint Venture Property Development
Having a roof above one’s head is an essential need. Most people today look forward to having their own home, especially when they can have a say in its design, depending on their taste and preferences. Due to the high demand for property development services, there has been a steady rise in the number of different agencies that offer such services. More and more often, instead of starting the project alone, people opt for joint ventures with property developers.
What is a joint venture? It refers to a commercial arrangement where two or more parties come together and pool their resources towards a project. The real estate industry is one of the most lucrative ones hence the reason why many property investors and prospective homeowners are making joint venture property development deals.
Do you own a property? Are you considering joining hands with a property developer to build your home but are still not sure whether it is a good deal? You don’t need to be an expert to make this decision. Below are some of the reasons why you should make such a bold move;
- Increased Capital Base
Projects often require huge chunks of money, whereby it could be hard for a single individual to have all of it at once. In joint ventures, both parties contribute a certain amount to the project depending on the terms of their contract. Additionally, with the seed capital in hand, the partners have higher bargaining power when it comes to accessing debt capital.
- Technical Expertise
The two parties that come together are most often the developer and the landowner. Here, the landowner provides the land on which the house is to be built whereas the developer has the technical know-how and expertise. The developer offers development expertise in terms of concept development, project management and design, and oversees the project to its completion. As a result, the landowner is assured of professional work and is relieved from the daily hustle of regularly checking on the progress of the project.
- Market Penetration
If the main project’s purpose is to make it available to the market after completion, then a joint venture is the way to go. Agreeing with a well-known property development company means that the property will reach a broader audience. Consequently, since the real estate product was built up to standard, it will be on demand and exit the market faster either by selling or renting. This means that both parties will realize their returns on investment (ROI) sooner.
- Shared Risks and Profits
Like any other undertaking, some risks are bound to happen. In case the project fails at any stage, you are assured that the losses will be shared. This means that you will not have to deal with the losses by yourself as the other party also has a share of it as bound by the contract. Conversely, a successful joint venture will generate a profit which both parties will be able to share accordingly.