Joint Venture Property
Questions and answers
We know there are many questions, and we will be glad to answer each and every question you have – just send them in to info@jointventureproperty.netWe have found though, that many people ask similar questions, so we have compiled written answers to these in order to save you the time of writing in:
Who joint-ventures with us?
Normally people who know us, or have been referred by friends or colleagues who know what we are about. Those who are looking for an extra income source; those who are looking to build their own retirement fund; those who are aiming to change their career, but need to secure an income stream first; those who wish to invest savings; those who wish to get in to property; those who are sophisticated investors looking to diversify and expand their portfolio; and all from very different backgrounds and with different aspirations.Where do you look for projects?
We are able to source projects all over the UK, through our network of acquisition specialists.What is the typical development project you undertake?
We actually take on a variety of projects, both in the residential and commercial markets, although we have more experience in residential. Previous projects have included large-scale renovations and new-build. In the future, low-cost and eco-friendly housing will also feature.If JVP is obtaining funds from individuals, why does it also need funding from the banks?
Doesn’t this mean more risk?
Using bank funding allows the company to ‘leverage’ investment funds in order to make a higher profit. It means that the company can effectively invest using the bank’s money, and property is one of the only forms of investment vehicle where this method can be utilised. For example, if the company were to develop a project costing a total of £1,000,000 solely from it’s investment funds, and it made a £500,000 profit, it would have made 50% return on investment for it’s partners. However, if in this same example, the company had only used £500,000 of it’s investment funds and borrowed the remaining £500,000 from the bank, it would have made 100% return on investment. The ‘risk’ carried is the interest due on the bank borrowings, but this is built in to the project costs at the outset. The bank does it’s own due diligence on the project and would not lend money unless it was confident of a return.What level of returns will I get as a Partner?
The company always aims to return at least 20% on investment (£2,000 for every £10,000). However, it is important to understand that no return figure can be guaranteed. In all cases, the company will pay out 50% of the project profit to the partners on a pro-rata basis.How long does the average project take?
A simple project can be sourced, completed and sold within 1 year, and more complex ones will take longer. We work on an average of 12 months.When do I get paid my share of the profits?
At the outset of a project, you will be given a profile of the project including a forecast as to the expected duration. As soon as a project has been completed and all sale proceeds have been received, a final set of accounts for that project are produced, which shows exactly what returns are due to our Partners. Allow 30 days after sale proceeds have been cleared to receive your returns. (On projects with multiple units, you will not always have to wait until the last unit has been sold.) You will now have the choice to re-partner with us on a new project.Do I have to pay tax on my profits?
Our projects are managed through a limited company and under tax law, we have to deduct 20% of the profits at source and pay it to the Inland Revenue on your behalf. Depending on your particular tax affairs, you will have to top-up this amount or be due a rebate. However, we are not tax advisers and you must seek independent, qualified advice on your particular position, relevant to your other business or employment affairs. We can recommend professionals if you wish.What fees do I get charged by JVP as a Partner?
None. Each project is costed out and includes normal project management costs. If a third-party is contracted to build and manage a project, their charges are included.Why do I have to commit as a partner before a project is found?
The company cannot source or negotiate a price on a project without knowing what funds it has available. There is no point sourcing a really good project to then find out the funds are not ready. Your funds have to be in the company’s client account before they can be considered for a project.What happens if you have too many partners for the next project?
Capital will be allocated to a project on a first-come, first-served basis. In other words, if 20 Partners had each put in £10,000 totalling £200,000 but only £150,000 was required for the next project, the first fifteen Partners would be allocated to this project, and the last five would have to wait for the next one. Your place in the ‘queue’ is dictated by date of cleared funds and signed paperwork. We will not dilute the returns for our Partners by including more funds than are necessary.Can I exit as a partner at any time?
Once you have joined as a partner, you are committed until the project you are joint-venturing with has been completed and sold. However, if the company cannot start a project within six months of you joining as a partner, you are entitled to a refund and interest if you wish. The interest is calculated at the same rate as received by the company’s interest-bearing client account during the same period.How does the legal charge work?
As a partner in a project, you will be given a joint charge (with the other partners) on the property which will be registered at the Land Registry. We believe this is unique to JVP and has been put in place to provide further security for you. It effectively means that the property cannot be sold without your interest in the property being accounted for. Whilst the funding bank will always take the first charge (just like the mortgage company on your house) and their interests come first, you and the other partners on the project come before the company.What are the risks?
You must understand that a return is not guaranteed, nor is the return of the original amount invested. It is possible to lose part, or even all of our investment. However, this is obviously not the company’s aim and safeguards are put in place to avoid this happening. The main risk is that the property market could crash during a project, and a high-enough sale price to cover the cost of the project cannot be achieved. This is a risk out of our control, but through experience, the company develops property least likely to be affected by this condition, and allows enough profit margin for a ‘market correction’ to be ridden-out. Other manageable risks are catered for as much as possible, with insurance, legal charges for our partners and quantity surveyors used where appropriate. Half the profits are allocated to our partners, with the other half remaining with the company. With at least 20% return on investment forecast for every project the company undertakes, the original investment is covered by a significant margin.You must make your own decision and if you do not feel comfortable investing with JVP, then please don’t partner with us.