How to Joint Venture for Big Profits

Dan Austin: [0:01] Welcome to the Collecting Keys Friday Focus. Hey there. Welcome back to another Collecting Keys Friday Focus where Mike or I talk about something that is relevant in the industry or just something that's top of mind for us in our business throughout the week. Today, I will be your host, Dan Austin, aka investor man Dan. And speaking of weeks, man, we had a great week in our business. We we closed three wholesale deals. I got about 60 k in revenue, which is pretty sweet cash infusion into the business. We listed one of our most recent flips, and I'm so happy, so stoked to have this thing off of my radar and out listed with a realtor. It's a project we've been talking about for the last couple months that I just despise. It went over went over budget. It went over schedule, all for good and bad reasons. So I'm just happy to be done with that. And then we dove right into another renovation on one of actually, properties we bought about a year ago. When we walked it, we we token it the the the heroin house because when we were walking it initially, Mike and I actually walked this property, we found some heroin pedophilia. Pet pet this is not the Jeffrey Epstein episode. This is not about pedophilia. This is heroin paraphernalia. Sorry. Those two words are very close. Yeah.

Dan Austin: [1:15] So we walked in. We found a bunch of heroin stuff there. So it's a heroin house, and it is also a piece of shit. As we open it up, started gutting it when the tenants moved out, we realized the whole back of the house was, like, rotting away and just kind of floating there. So that's kind of fun. It's actually a good probably a good deal breakdown, something that we'll talk about in future episodes because there's kind of a lot of intricacies with this deal other than it just being a rental property and us just renovating it because we're actually not sure what we're gonna do now. So we might have to pivot, might have to adapt. Anyways, that is enough about me. Today's episode wasn't meant to be about me. It's actually meant to be about partnerships. I've been quite a matchmaker lately helping people partner up. And generally speaking, I get a lot of new investors asking me questions about partnerships, and they, in particular, ask me, you know, when when or if they should partner up. They ask me, how do you even do that? Like, what does that legally look like? And then also, how do I protect myself throughout the partnership to make sure I don't I don't lose or or take undue risk with a partner?

Dan Austin: [2:11] Because sometimes, I'll be honest, your partners may not be somebody that you've known for ten years or have that that long running relationship with where, know, a family member or something. Not that you can always trust family members. Anyhow, I I wanna just go through I'll answer those three questions quickly and kinda go over what I do. And and the reason why I think it's important to cover this topic as well is it's a piece of advice I do give new investors that have this fear of loss and they're they're the analysis paralysis. You maybe know, they have an opportunity that I know is a good opportunity, but they're just they can't get off the bench for it. I tell them, you know, go and find a person a good person you know that you that that can complement your skills and partner with them. Even if you have all the resources, you know what? Reduce the risk by partnering with somebody else and also just gives you comfort that you have somebody to lean on when when you're going through this. Okay. So when or if you should partner. So what they say about partnerships in real estate is to to be successful, you need to have you need to have opportunity, like a deal. You need to have something in your contract. You gotta have resources like money and crews and and those sorts of things, or you gotta have hustle. You don't have to have all three. You just have to have one because you can find or partner with others that can bring the the other one or two skill sets in with you.

Dan Austin: [3:32] A great example of this is actually in their instant investor program where we are able to facilitate a partnership between two of our members. One of them actually got a deal under contract. He had the opportunity, and the other one runs a construction company and has a lot of knowledge and resources around rehabs and renovations. So we brought them together, and I have no doubt they're gonna be successful. And that's just a great example of so somebody had the opportunity, somebody had the resources, and they both have hustle. That's why they're in a group. And now they came together and have a have a great chance at making a really fat profit on that deal. A second reason why you might wanna partner, which I mentioned earlier about new investors, is it it's to reduce your risk or the perception of risk. Sometimes you're you're going to push yourself a little bit, and you know it's a good opportunity, you have all the resources to do, but you bring on a partner. And it's not just to reduce the risk, but it's to bring on a partner to see if they might be a good partner for other ventures and test them with that situation. But I will say this, just from a comfort level, it's sometimes nice just having another person to bounce ideas off of and have thoughts. That's one thing that Mike and I complement each other really well. We're both really open and really willing to take advice from the other person and other ideas from the other person. And that's definitely helped us be successful. So then we've talked about, you know, when or if you should partner up.

Dan Austin: [4:55] Let's talk about how you do that. And my biggest recommendation for folks is looking at a joint venture as opposed to starting a business together. It's like dating before you get married, you know, handshake before you give them the hug and kiss if you get my drift here. The reason why I say that is there's just a lot involved in starting a partnership and starting a business together, And it can get even messier, especially if you start buying assets together and, you know, say you hold rental properties together, and you just have a lot intertwined as you tend to do as you start a business with somebody. It just gets messier on the exit if something goes bad. Especially, you know, you get engaged and you don't like each other. Well, now you're married and and you have to go through a divorce. As opposed to with a joint venture agreement, you can just put a joint venture agreement together that's very limiting to just the circumstances. Maybe it's just one project. And it's just way easier to put together and makes you way more adaptable when you're trying when when you're trying to do deals, and you're trying to partner up, but you have no reason to partner up, and all of a sudden you have a deal in front of you, you can just whip together a joint venture agreement.

Dan Austin: [5:59] You can go online and Google it, or you can, you know, go to a lawyer and have them drafted up and have a framework set up. And then you can just dump what you need to as far as the bullet points of what's going into that joint venture agreement. Here's a good example, we had a couple of new investors come to us, and they actually bought a deal from us recently. And they're asking, you know, what they should do and how they should do it. And this exactly how I pointed them. They came together. This is their first deal they're going to do together. And they want to flip a lot of houses. And if this works out, they want to keep doing it together. So I just said, hey, instead of trying to start a business and doing that whole rigmarole right now because you've got a deal in front of you, you have something you can action on, and you don't know if you guys are gonna stick together for more than six months. So I pointed in the direction of starting a joint venture agreement. So they purchased the house, they each already had their own LLCs. So they purchased the house fifty fifty owners, each LLC had 50 ownership. And then they went to a lawyer and drafted up a joint venture agreement, isolating it to just this project. Of course, they could reuse that joint venture agreement, but that's kind of how it's set up is, you know, specific to this flip, specific to their LLCs owning the property, which they are owners of, and then all the details about the project and all the details about the partnership within that joint venture agreement.

Dan Austin: [7:15] That's kind of my advice, if you're going to do it, you should do it, I would start there. And then if you want to go a little bit more advanced, and you find somebody that you do want to start a business with somebody like, you know, your your Mike to your Dan, then you can start looking at, you know, starting up a business, operating agreement, get shared bank accounts and all that sort of stuff. So now the last question is how do you protect yourself? That's where the joint venture agreement actually comes into play, and that's what you put into the joint venture agreement. And what I always recommend is to I tell people, put whatever you are bringing to the joint venture in the joint venture agreement, and then also put what you your roles are in the joint venture agreement. Are you going to be the one managing construction, and the other person's going to be managing the the sale of the property, or who's going to be doing what? Another example would be is if you're a realtor, and you're going to list the property, or you think you're going to list the property, put that in there. Little things like that, little nuances about who's doing what and what their roles are, are very important. And then as it shakes out on the back end, when you sell the property, who gets what? What's the split?

Dan Austin: [8:20] Is sixty forty? Do does another person expect to recover capital, then you profit above that? Is it just straight fifty fifty regardless of what you contribute? Anything that you guys can agree on. I think the main point is is that you agree on it and that you each understand those details and then it goes in there. Don't just put things in a an agreement neither of you understand or or or no, because then if it goes sideways as lawyers are tearing it apart, people are gonna be like, didn't know that. And you're like, yeah, of course, you agreed to it. You signed it. And and now everybody's upset and then people get litigious. So make sure you understand what's going in there and that you want it in there through the looking at it through the lens, of a lawyer if something goes bad. I always say, you know, plan for the worst, but hope for the best. And that's why you put those details in the joint venture agreement. Agreement. And the great thing I do love about the joint venture agreement is if things go well, you can do another JV, you can use this framework and do it again. If there's things you want to adapt that you didn't like about the agreement, like how profits were split or who contributed what, you can adapt it to the next one.

Dan Austin: [9:20] And then as you build up that relationship and that you're profitable, and you think you want to do this as a partnership, or there's a reason pushing you to do it as a partnership, then you can do it. You you've dated long enough. You've gotten engaged. Mom and dad approved, and now you are a true partnership and ready to go make money. Don't just dive into it and hope for the best. Because I'll tell you what, all partnerships are great when we're we're making money. So that that's my Friday focus for this week. I think what I'd love to do is I'll follow-up maybe next week or the following with how do you unwind a partnership when you get into one. Mike and I just did just did an unwind, not of our personal partnership, but we actually had a third partner on a different venture of ours. And we just we we just closed that up and and wound it up. All good. No issues there. All amicable. But it's actually interesting topic to talk about, like, sometimes things get to a point where you do have to unwind them, whether it's a good thing or a bad thing. And everything I talked about when you're putting things in a joint venture agreement, or you're setting up a partnership, all the conversations that happen upfront and are documented, those come into play even if it's on good terms and you have to split up assets and all that.

Dan Austin: [10:27] It's it's a really it's a really relevant topic, so we'll chat about that and maybe go through that for you all. Anyhow, that's it. If you wanna learn more about JVs or actually find somebody JV with, you should definitely join our instant investor program. Go to the instantinvestorprogram.com, check us out there. Partnerships galore in there. That's one of the great things about being part of a community actually is you do have the opportunity to learn from other people or you know, make money together. Other than that, if you like this, please go and give us a five star review, download all of our episodes. Like I always say, if you don't have anything nice, don't say anything at all, but please give us a five star review. Follow me on Instagram at investor man dan. I I I answer my DMs. So if you have any questions about JVs or partnerships or anything like that, please hit me up in the DMs. I'll get right back to you. Other than that, see y'all next week. Thanks for listening to this collecting keys Friday focus. Be sure to subscribe wherever you listen to your podcasts.