In recent times, the real estate industry has witnessed a surge in joint ventures, where investors and developers collaborate to undertake and complete projects from inception to completion. However, establishing successful real estate joint ventures is a complex undertaking, requiring careful consideration of various aspects. It is essential to understand what a real estate joint venture entails.
Features of Real Estate Joint Ventures:
Real estate joint ventures play a pivotal role in the execution of large projects, encompassing both development and financing aspects. This collaborative effort involves two or more parties combining resources to accomplish a shared goal. In such ventures, professional developers collaborate with capital investors to ensure the qualitative and timely completion of the project. Each partner has a defined role and must fulfill their responsibilities without encroaching on the domain of the others.
Role of Joint Venture Real Estate Investors:
The primary role of joint venture real estate investors is to provide capital for the project, ensuring a continuous cash flow throughout its duration. These investors often own land plots but may face constraints due to factors like distance or lack of technical expertise. In such scenarios, investors enter into agreements with expert developers, where the investors handle the financial aspects, and the developer manages the physical construction.
Every real estate joint venture comprises two main components: real estate investment companies and developer companies. In industry terms, these are referred to as the capital member and operating member, respectively. The capital member is an accomplished financier, while the operating member is a skilled developer company. The developer should possess the ability and expertise to source, manage, acquire, and develop the project. Meanwhile, the capital member contributes a significant portion of the finances even before the project commences.