Conservative lending criteria and strict application guidelines aren’t turning off savvy property investors, who are increasingly looking for new ways to get their next property deal off the ground.
As banks clamp down due to a tightening economy, investors are “starting to become more creative when obtaining finance”, confirms property investing educator and mentor, Jennie Brown.
For some investors who are keen to take advantage of great property opportunities in the current market, this means turning to private lenders rather than going through traditional lenders. For others, it means creating money partnerships with individuals, groups or entities to form property joint ventures, or JV’s.
JV’s offer a fantastic opportunity to get minimise your risk when getting into the property market, Brown says. “When forming joint ventures, you each put in an agreed amount of money and effort, and then share the outcomes of the property deal,” she says.
Brown says property investment deals financed via joint ventures or money partnership provide investors with a world of opportunity, and she believes these types of deals can be incredible profitable. She should know, as she has invested this way many times over herself.
“Some of my own personal deals were set up in this way, and all parties came away having benefitted in a way that would not have been possible if they were limited to what the bank would offer,” she says.
To make it work, however, you need to make sure everyone in the JV is on the same page. This means setting out a clear plan for your investment, including the budget and the timeframe of how long you will hold the property.
Brown also recommends that when you are assessing the risk and analysing the deal, you should be totally upfront with your potential partners about your situation and your requirements.
Finally, you need to write a clear exit strategy, should one of the partners wish to sell or get out of the deal, and you need make sure all of the paperwork is handled through an experienced legal professional.
“Unfortunately, not every man and his dog can be trusted to do what they say they will, and not every stranger is what they seem, so be very choosy about who you partner with,” Brown says.
“Ask questions, ensure your lawyer has input in a fool-proof contract document that protects you from all angles, and trust your instinct.”