Joint venture partners and financial risk

Recently there has been some discussion on the forum with regards to property joint ventures and any financial risk associated with your partner. This has opened up a very interesting line of debate with regards to joint venture partnerships and the financial risk taken on by both bodies. We will now take a look at some of the aspects you should take into consideration when investing on a joint venture partnership basis.

Finding a joint venture partner

In theory finding a joint venture partner is fairly simple with professional websites such as LinkedIn proving to be particularly popular amongst investors. There are also many other ways to find an investor such as a recommendation from friends or family or even a recommendation from your bank. When looking for joint-venture partners it makes sense to put together a short list of potential candidates, where applicable, and then simply choose the best one for your situation. It may be that different joint-venture partners will be more appropriate for different ventures but this will become clearer over time.

Know your partner

It is imperative that you get to know as much as possible about your potential joint-venture partner taking in their history, reputation, contacts and above all their strengths and weaknesses. Many people automatically take it for granted that a partner with experience is the one of them. The reality is that your skills, experience and targets need to complement each other to get the best out of any working relationship. If you have any queries, questions or issues about each other, these should be addressed as early as possible to avoid any pain further down the line.

Financial risk

When looking at financial risk there is obviously the risk of losing the capital which you put into the venture. However, many people forget that there is also the matter of any loans taken out and the fact that, depending upon the legal set up, any remaining partner may be liable to all financial risks if the other disappears. While in theory you would still have the joint venture assets to offset any additional financial liability, you do need to protect yourself as much as possible.

Don’t be complacent

Even if you find a potential joint venture partner who ticks all of the boxes and your first investment works well, do not get complacent. You should always ensure there are legal structures to your ventures, everybody knows where they stand and there are no grey areas. Just because the first venture was successful does not mean to say you should “take your eye off the ball”. The chances of scam artists getting through this very basic of filtering systems are very small but some of these fraudsters are very inventive and very creative.

Conclusion

Whether a potential joint venture partner is a recommendation or somebody you found yourself/approached you directly, you should do your research about their reputation and their track record. Always structure your ventures in the correct legal manner and ensure that all parties are afforded the upmost protection at all times.