How To Develop Property in a Joint Venture

If you’re thinking about getting into property development, or if you own a property with development potential but don’t feel confident tackling a project on your own, then a Joint Venture with an experienced, credible partner can make good sense.

Joint Ventures work well when partners compliment each other – you’ll want to partner with someone who has something that you need, and who needs something that you have. Complimentary skills, backgrounds, and assets lead to clarity of roles and responsibilities, and better teamwork.

We’ve been in a number of Joint Venture Property Developments in Melbourne over the years.

Some of our clients have the capital required for property development, but need a partner with the industry knowledge and experience required to look after everything. This is the most common Joint Venture, where our partner is happy for us to take the lead on things. In these projects, we look after everything from end-to-end:

• Identify quality sites, in areas that will outperform the market in coming years
• Conduct comprehensive project feasibility studies to determine potential scope, costs, returns, profits, etc
• Liaise with key professionals prior to purchase to confirm all assumptions
• Secure finance for each stage of the development
• Negotiate the purchase of the site at or below market value, on the best possible terms
• Manage the design, planning permission and build tender process
• Project manage on-site construction
• Oversee end sales and/or rentals

Some of our Joint Venture development project partners already own a property, but aren’t sure about the development potential and/or how to see it through from start to finish.

In these circumstances, we look after all of the above – apart from purchase of course – and also bring on the legal expertise required to structure things properly (e.g. ownership, liability, KPIs, profit share, etc).

These types of projects make a lot sense for owners who recognise that they’d be better of maximising the value of their biggest asset rather than simply selling to a developer.

Why give the profits to someone else when you could achieve them with the help of an experienced partner?!

Sometimes, owners choose to keep one of the completed dwellings for themselves. Others choose sell up completely and move on, while others like to hang on to some or all of them as long-term rentals and/or family beneficiaries. We’re flexible – as long as all parties are transparent and act with goodwill, then happy days.

Some of our joint venture partners are a bit more experienced and involved, but simply want a partner to look after the things that they don’t enjoy or have time for (site search, feasibility studies, design, etc.). In these circumstances, we typically go 50/50 on all expenses and profits, and simply charge a management fee throughout.

A surprising number of Joint Venture partners we work with are after some practical experience for themselves or their children – with an eye towards building a multi-generation property development company.

Regardless of your background, circumstances or objectives, we’re always open to establishing new relationships. If a joint venture doesn’t make sense, then hopefully we can help in other ways.

We’re in a Joint Venture development project in Melbourne at the moment. This is how it works.

Our partner owns the property, and we’re managing the development from end-to-end: from conducting a full project feasibility, through to development design, planning permissions, build specifications and appointments, finance, construction oversight, and sales marketing.

Our partner contributes the property, whereas we’re buying in with a mix of sweat equity, payments to third party professional (we pay Town Planner, Surveyor, Draftsman, etc.), and extra capital required by the banks for construction. We sought advice from a good Accountant and Lawyer, and have structured things so that he maintains ownership of the property all the way through, and we act as a Development Consultant whose fees are deferred until project completion. 

Once the project is complete, our partner will decide whether he’d like to sell all, some or none of the new dwellings, and we will split the profits (determined by sale prices or by sworn valuations) equitably, based on the legal contracts that we agreed upon at the beginning of the process.

If you’re thinking about getting into Property Development in Melbourne, Australia, get in touch with us at hello@propertyanalytics.com.au.

As Licensed Buyer’s Advocates, we look after all aspects of purchasing profitable property developments in high growth suburbs, and, as experienced property developers, we regularly project manage entire developments. We are respected property professionals, and credible Joint Venture partners.