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Joining forces for a shared benefit when putting together your finances

Friday, 8th Jul 2011
Categories: Finance, Newsletter

young family

For the astute investor, the current market is signaling that it’s a great time to buy property. However, there’s only one problem …. money.  Perhaps you’ve used your existing equity, you don’t have enough cash for a deposit, or you can’t borrow more without exceeding your debt service ratio.

But don’t let that phase you. You just need to think laterally! Even if you have no money or can’t scrape together what you need, there are other ways in which you can get into the market. One of those ingenious ways is through a joint venture arrangement. It involves getting together with one or more parties for the purpose of a commercial activity such as purchasing real estate. You both contribute something to the arrangement and in return you share the rewards.

For example, you may be able to find people who are looking to invest in property but don’t have the time available to find something suitable. You may be able to come to an arrangement where you find a suitable property for them where they would put up the money for the property that you have found, and in exchange for your time they would give you a percentage of ownership of the property.

Or consider this: maybe you have a great income from your job and tick all the boxes for being able to borrow, but just don’t have any equity or cash available for a deposit. Then comes along a partner who has plenty of equity available in their home to cover a deposit (and other ‘on’ costs) but because they no longer work much, they aren’t really able to borrow. Together, you now have the capacity to combine your situations to make that purchase and reap the rewards together.

Another alternative may be to agree upon receiving a fee for your efforts as opposed to a percentage of ownership. If it is a property development site for example, you may be able to get a spotters fee or referral fee if you find a suitable property for a developer.

If you do enter into a joint venture arrangement, it is best to join forces with others that complement your own abilities and skills, and what you can bring to the table. To ensure a smooth relationship, choose those who have a similar mindset to you and focused on the same agreed goals for the project.

The options for joint venture arrangements are just up to you and your imagination, but always ensure you get proper financial advice and have a solicitor draw up an appropriate written agreement. They are a great way to help you continue on with your goal for financial freedom and although it may mean sharing the rewards, remember 50% of something is better than 100% of nothing.

Finance Broking Services are provided by Momentum Wealth Finance Pty Ltd*. Finance Brokers Licence 384632.