| Looking for higher than average profit from your | | | | to purchase another development site and he has his |
| property investments without high risk is something | | | | funds tied up he cannot go ahead to purchase and |
| that appeals to people who do not have the time to | | | | could well miss out on a good deal. |
| manage their investments on a day to day basis. | | | | Another reason is that a developer should keep |
| Joint Venture investing can solve this problem. | | | | some fluid cash for unexpected expenses, something |
| Like any property investment there are risks involved | | | | that may crop up that has not been allowed for in |
| of course, but with Joint Venture investing you can | | | | the financial allocations. |
| be investing in property developments that have | | | | As a Joint Venture investor you would as we say, be |
| already had approval and are well on the way to | | | | investing once the bank has agreed to put up the |
| being started. | | | | construction costs. At this stage council approvals |
| When property developers approach a bank for | | | | have been met, feasibility studies have been done |
| funding they understand that at least 60% of the | | | | and legal documentation has been set up for lenders. |
| property needs to be pre-sold before the bank will | | | | Joint Venture investors can then put up their money |
| release development capital. This protects the bank | | | | and get a guarantee from the developer. |
| from funding a property that only gets half sold by | | | | There are basically two methods of lending to a |
| the time it is finished. If this was the case there | | | | developer: |
| would also be a good chance that the developer | | | | 1. The investor receives a portion of the total profit |
| goes broke because he would have to be paying the | | | | from the project |
| interest out of his own pocket, never mind any | | | | 2. The investor receives a fixed return on their funds. |
| capital that the bank may want back. | | | | Either way the investor is dealing directly with the |
| Pre-selling protects both the bank and the developer. | | | | investor or his employees and should be able to get |
| So where do you fit in as a Joint Venture investor? | | | | straight answers about any concerns. |
| The bank will lend somewhere between 60% - 70% | | | | The first method can allow for a much more |
| and the developer has to raise the balance of the | | | | substantial return on property investment, but carries |
| capital to meet the difference or put up the money | | | | more risk, while the second method is a fixed income |
| themselves. | | | | return. There is of course the option of investing in |
| Even if developers have funds available they very | | | | both methods in the one development. It is just a |
| rarely want to use it at this stage. The main reason | | | | matter of setting up the funding to do so. |
| for that is that should the developer be approached | | | | |