Investors are attracted to the real estate market because of the incredible potential it has to multiply their money. Appreciation rates of properties are very high and almost all property deals guarantee you the certain amount of profit.
One of the main reasons why many others are not able to invest in real estate is that they do not have sufficient cash to pay the down payment for the purchase. However, there are plenty of financial schemes and even with ‘No Money Down’ option available for small investors to enable them to sustain the costs of purchasing a property.
New investors can consider joint ventures, wherein one person finances the project and the other does the actual work. As a result, the one who does all the work has to put no money down for upfront costs. If you are new to the real estate game and do not have enough funds to bear the upfront costs, you can opt for a joint venture. It is legally binding, and both parties agree upon a certain percentage of profit each would receive after the project is completed.
It is a mutually beneficial partnership, wherein profits are divided according to individual contribution in terms of labor and money. The joint agreement is drawn to provide legal protection to the concerned parties in case the project fails.
A joint venture is beneficial if you are in one or more of the following situations:
- When you lack borrowing capacity
If you have some money to pay the down payment but are not eligible for a loan, a joint venture would be beneficial for you. You can enter into a partnership with someone who has the necessary funds or is eligible for a loan to support your project.
- When you do not have liquid cash or equity
You may be eligible for a loan due to your income or credit score. However, you may not have the necessary cash required to pay for the down payment of property purchase. In such a case, you can enter into a partnership with a person who can take care of the down payment.
With literally ‘no money down’ towards down payment, you can begin your dream project. There are instances wherein the seller carried a certain amount of the loan as a second mortgage. In exchange, you are required to give him a certain percent of the profits as decided in the agreement.
- You have the necessary skills
There are investors who have the expertise to carry out a project or who have skills required for renovation. They may lack the funds for the project or may not have the inclination to invest money in the project. If you are one of those, then you can find a partner who has the money but lacks the time and expertise to complete the project.
It is important to draw an agreement carefully including all minute details to avoid any form of dispute in future.