Over the past decade, Toronto’s real estate market has continued to heat up. As the city continues to grow and expand, the demand for housing will also rise. This has made Toronto’s housing market an excellent opportunity for investors of all kinds.
Like any investment, the housing market has both risks and rewards. Navigating the unique complexities of real estate can feel overwhelming for solo investors. The good news is that there are other options to support entrepreneurs who want to reduce the stress of investing.
Whether you’re entering the real estate investment process for the first time or looking to diversify your portfolio, a joint venture investment opportunity could be the right option for you.
Learn more about why Toronto’s real estate market is a great place to invest on my blog.
What is a Joint Venture Investment?
In brief, a joint venture investment is an agreement between two or more parties to combine their resources on a shared investment. Together, partners share a portion of the duties required for managing their investment and each receives a portion of the profits.
Joint ventures can be between individuals, companies or both. One of the primary attractors in joint ventures is the ability to access another party’s expertise and capital for your benefit. Splitting capital contributions and return also means any risks or losses are shared between partners. This makes joint venture investments a safer option than investing solo.
New to real estate investing? Check out these resources to get started on the right track.
- Your Guide to Luxury Condo Investing
- Real Estate Investing For Beginners: My Top 5 Tips
- 5 Toronto Neighbourhoods That are Safe Bets For Investors
Partnering with Experts
One of the primary advantages of joint ventures is working with partners whose specializations will make the investment as successful as possible. This could be through strategic insights, special responsibilities or even reducing certain costs. For example, partnering with a contractor could help you save on overhead costs for any repairs you need to make on the property.
Shared contributions can also mean that you’ll have access to certain investments you wouldn’t have had access to on your own. The benefits of this go beyond just profits. A successful joint venture partnership will allow you to take advantage of experts who can help you learn the ins and outs of real estate investing. This can be extra beneficial for first-time investors who are looking to build on their knowledge.
While working with partners on a joint investment can help remove some of the workload and stress from your plate, it does come with its own downsides and challenges. The most obvious disadvantage of joint venture investments is that working with a team means dividing the returns. Inversely, joint ventures also mean dividing losses should they occur.
Joining a partnership will also require greater attention on your end when it comes to communication. Each member in a joint venture has a responsibility to work with their team to ensure collective success. Based on who you choose to partner with, this can mean more or less time allocated for meetings, phone calls and other communications.
Unfamiliar with some of the terminology in this article? Check out my most recent Real Estate Dictionary.
Joint Venture Structures
When you enter a joint venture, you and each partner you work with will take on a specific list of shared duties. These responsibilities are typically assigned based on the unique strengths and experiences of each party. In order to ensure the overall success of the investment while protecting yourself and your partners, you’ll want these duties to be formally aligned in a legal document.
Just like roles and responsibilities, your structure document should also outline the main financial expectations. This includes the distribution of profits and each party’s capital contributions. A predetermined exit strategy is also a key facet of structure documents.
Having these terms established in a legal document will be beneficial for all parties in the long term. While there are boilerplate contracts available online, the best option will always be custom documentation tailored to your specific needs. Your agent can connect you with an attorney who specializes in real estate. They can draft up an agreement that protects and aligns all parties involved.
Have More Questions About Investing in Condos?
- Keeping Your Condo as an Investment Property
- Is A Toronto Condo A Good Investment In Light Of COVID-19?
- Your Guide To Investing In Pre-Construction Condos
As a local agent who specializes in investment properties, I can help determine if a joint venture investment in real estate is the right fit for you. Contact me.