Joint ventures can be a great way to make money, but how do you actually find a partner who will provide you with what you need? Developer Tim Riley reveals some handy tricks.
Finding people to partner with is not as hard as you might think. When I am asked how I’ve been able to group up with people in multiple projects, my answer is simple: I start with my personal networks.
If it hasn’t been a friend or family member I’ve partnered with, it’s been a friend of a friend of an acquaintance. As you do each successive project, it also gets easier. I’m now at the point where I’ve been doing property projects for a while and have a bit of a reputation. It makes a big difference. If you can point to something you’ve already done and done well, potential partners will be a lot more confident in you.
Still, people I have never met enquire about participating in future projects. It’s a little like blind dating! They’re trying to get an idea about whether I’m someone they can trust, and I’m doing the same with them.
My approach has been to go slow and try to get to know people before committing to working together. Despite what people say, investing is an emotional thing. Think about it. If everyone is dealing with their own hard-earned capital and millions in debt, no matter how hard they try, things will get emotional.
Using social media
Another way of finding partners – whether they are personal contacts or not – is to communicate what you are doing, have done and plan to do next.
This is getting easier these days. Setting up a blog and sharing what you are doing via social media is remarkably simple. Sites like WordPress, Tumblr and Squarespace let you set up a website in minutes. Twitter, LinkedIn, Google+ and Facebook can help you build and find communities that may be interested in what you want to achieve. You just need to have the confidence to put it out there and communicate what you are doing or what you want to do. People are watching, and you never know where a potential partner will come from.
Communicating your intentions
The first step in spreading the word about what you’re doing – regardless of what communication medium you’re using – is to be clear about your vision, property strategy and, specifically, what type of project you want to do.
In my experience, people respond better when you ask them to consider a specific proposal rather than just a high-level concept. What I like to do to make things tangible for people is create a Scope document that I share with potential partners.
This document clearly outlines the vision, scale, location, size, quality and sustainability objectives of the project. It also details the timing and financial parameters, such as the estimated size and length of capital investment and targeted return, as well as joint venture partner information: the number of partners and their rights and responsibilities. I add an additional component by including project management information.
Because starting a property collective is typically a long-term venture, the dynamics of the group need to suit having a long-term relationship. Typically, most people in a property collective look at committing to a three- to 10-year horizon. There needs to be a high level of trust between joint venture members for the project to run successfully. For that reason it helps if the members of your property collective are friends and/or family members. In my experience these kinds of syndicates have worked best. I think this is because friends and family members trust each other more and are more in tune with the way each other operates and communicates. This reduces the chances of misunderstandings developing. Of course, if you’re in the position of not having enough friends or family members to achieve what you want to achieve, you could look for additional partners by:
- Asking your inner circle to recommend your idea to their friends or family members. Odds are that the person you are looking for is only one or two degrees away.
- Posting your idea on a property investment discussion forum and seeing who responds. Forums like propertyinvesting.com/forums, investing.yipmag.com.au, somersoft. com/forum, binvested.com.au/forums and australianpropertyforum.com all have large communities of investors. You never know what response you could get if you put your idea out there.
- Posting your idea to LinkedIn groups, which could also put you into contact with a potential partner. There are now many LinkedIn groups that have formed around property investing and property development.
Vetting your joint venture partners
Developing a thorough way of screening potential joint venture partners is tough. This is particularly true if you
are assessing someone who you don’t know well, but it can still be difficult determining if someone is going to be easy to work with, even if you do know them. There are many things you need to think about. Consider whether they have:
- A complementary temperament: Find someone who will fill in the gaps around your personality strengths. The trick, of course, is to first fully understand your own strengths – sometimes easier said than done.
- Different operational skills: Find someone whose skills complement rather than replicate yours.
- Similar work habits: You have a shared view as to how much you will work to achieve your goals.
- Self-sufficiency: They are someone who will function on autopilot with virtually no input from you.
- A history of working together: Familiarity helps conversations move quickly and allows trustworthy cooperation.
- Emotional buoyancy: You need the capacity to support each other during the highs and lows of a property project.
- Total honesty: You and your partner(s) must be committed to telling each other the truth all the time, even if it’s tough to say or hear.
- Comfort in their own skin: They know themselves well and are ‘comfortable in their own skin’.
- A personality you like: If you don’t like your partner, all the great qualities they possess won’t be enough to sustain you through the long haul.
- The same overall vision: It is essential that your partner’s main motivations for joining your venture include a passion for the project you are pursuing.
