| Regardless of what it is that you are spending your | | | | estimated cost of development. The balance of the |
| time and money on, it is always beneficial if you | | | | development cost needs to be either funded by the |
| know how the system works and what makes it get | | | | developer themselves (but rarely) or from other |
| the results that it does. What we are talking about | | | | investors who will put their money up for returns |
| here is Joint Venture investing. | | | | that are greater than many other forms of |
| There have been some horror stories in the past | | | | investment available. |
| about people putting their money up for 'property | | | | What risks are involved? |
| development' but it is fair to say that most of the | | | | There are 2 main risks with Joint Venture investing: |
| people who have done this and lost money doing so, | | | | 1. The project will not perform as forecast |
| have put their money into what are called 'cash box' | | | | 2. The developer is placed into liquidation |
| situations. These are fund raising strategies where a | | | | As mentioned above, most of the problems |
| development company has advertised for | | | | associated with people losing money in development |
| investments but do not have a particular | | | | companies are where there is not a specific project |
| development in which the invested funds are being | | | | in place that the money is being raised for. These |
| allotted to. | | | | then are unknowns because there are no forecasts, |
| The 'cash box' system means that funds are pooled | | | | no land purchased or anything really secure so it |
| into an account and from there various development | | | | would be best to steer clear of them unless you |
| projects are decided upon at a later stage. | | | | have money you can afford to lose. |
| When this situation occurs there is no development | | | | Also these companies that do not have specific |
| on the books as such and therefore no projected | | | | projects that the money is being raised for can have |
| figures and therefore no guarantees can be offered. | | | | 'carte blanche' with the use of the funds. It means |
| Protecting your funds | | | | the managers can allocate monies whereto and |
| You can see that when doing Joint Venture safely, | | | | whenever they like. Instead of having just one |
| there needs to be a particular development in | | | | project that is being funded, they could have as |
| progress, guarantees from the developer and | | | | many as they like and if they do not have the skills |
| estimated profits on the project. | | | | or the finance to manage several developments at a |
| It is wise to make sure that the development has | | | | time, are more likely to have major financial problems. |
| been approved by council before putting funds up for | | | | Before investing your funds, do some research and |
| the project and preferably that the project has been | | | | find out who you are investing in, what they are |
| approved for bank finance. | | | | investing in and the progress of the development. In |
| Why are developers looking for funds? | | | | other words minimize your Joint Venture investing |
| Finance companies will only lend a certain amount to | | | | risk. |
| developers, usually in the vicinity of 60 -70 % of the | | | | |