The Power of the JV. Joint ventures are a great way to get started in Real Estate and leverage other people's experience. Listen in as we explore some ways we have partnered with others and used the power of the Joint Venture agreement to do more deals and make more money! JV Agreements are super simple and open up so many additional opportunities to help grow your business.
David: Alright guys welcome back Discount Property Investors. Mike, how are we doing today buddy?
Mike: I am doing great. It's the first time we have had sun in about six weeks here in St Louis, so--
David: Feels like it.
Mike: I feel good, getting a little sun in your eyes.
David: My chair is a little squeaky.
Mike: That's the way it goes. So what are we doing today? We are talking about real estate investing again? Or--
David: We are. We did an episode at the end of season one that we didn't publish because we had some technical issues. But it was titled 'The power of the JV'. So we are re-doing that episode now. You guys listening haven't heard it, but Mike and I have.
Mike: We lived it. Whether or not it's going to be any good the first time or the second time.
David: We got some good equipment this time around. Basically though we were talking about the power of a JV. Why you as a real estate investor/wholesaler should know about JV's, use them and focus on them. I just did a deal that closed yesterday, and it was a JV. Basically it was another investor that contacted us, and asked us if we wanted to buy his property. Mike you helped me with this one, so you will know about this one.
Mike: It was a real beauty.
David: He contacted us and said, hey-- do you guys want to buy this property? Mike was in the field, so I actually called Mike and said, hey are you near this property? Do you mind running over and taking a look at it? It was vacant. He did and it wasn't anything we were interested in. This investor also knew that were wholesalers. He knew were in the business of buying and rehabbing, holding rentals, and mostly wholesaling. He said, hey I know you guys are in the wholesale business, can you help me sell this property? I am not an agent, Mike is. But I just said, yeah I can put it under contract and market it out to my buyers.
Mike: Let's clarify. I am an agent, I have a license, but I’m not an agent.
David: I know-- you don't have any interest in listing properties. But that would have been one option to list the property for him, then try and sell it. The other option would have been to wholesale it and get it under contract, then sell that contract.
Mike: To me this is a great example, because this property-- it was definitely a rental market, probably C class neighborhood, kind of lower end is what you would call it. That area; listing with agents does not make as much sense as just trying to work with other investors. So this guy is savvy enough to know that--
David: No investor wants to pay retail. So if you put it on the MLS, already that asking price is retail. Even if it's discounted to a good number. Hey someone else hasn't bought it yet so-- it's retail, I need to pay less than that. So you kind of shoot yourself in the foot sometimes by listing those properties.
Long story short, the guy knew I was an investor and I was wholesaling. He said; hey wholesale this property for me. I get it, he wasn't another wholesaler, but I said, let's JV on it.
Mike: That's what I thought initially that it was another guy who had it under contract. But it was the owner, I just wanted--
David: Typically you are going to have another wholesaler to do a JV. You are going to partner with that individual, but in this scenario; he just said, hey help me sell it. So instead of me sending over a joint venture agreement, I actually sent him over a sales contract. It's really the exact same thing. I just gave me interest in the property to then go market it. We found a buyer and check is right here actually, 1700 bucks. One of our smaller deals, but maybe had two or three hours invested in total.
Mike: Like Dave said, I was already in the field, I was up in the neighborhood, just drove by, grabbed some pictures. Dave talked on the phone for a little bit with the guy, then we blasted it out and got it sold. Super quick little deal, again not something to brag about. But a quick little deal--
David: Didn't take us a whole lot of time.
Mike: Seller is happy; he was able to sell the property--
David: He text me this morning actually and said he has another one, a four unit. It was definitely worth our efforts.
Mike: Nice, we will have to ask him to throw a review out there for us.
David: That's right. So with that being said though, the JV is very powerful. So that scenario that I just described wasn't a typical JV, it was just separate, but typically a joint venture agreement is between two people that are going to come together to get the deal done. So in our world, that typically means it's another wholesaler that either has a property under contract, or a buyer. It could be either way and there are multiple scenarios obviously, but those are the most common.
Mike: I just want to say, we use this so often we even built a separate business unit on it called Let's Co-wholesale. So we basically-- we encourage anyone who has a property they can't sell, especially here in St Louis to check out Let'scowholesale.com. Submit a property to it, we review and then say, hey yeah we can sell this for you, blast it out to our buyers list. So we have built a whole business unit around joint venture, because we know it's such a powerful tool. So for--
David: All our competitors are copying us at this point. So we know we are doing something right.
Mike: Imitation is-- something flattery. I don't know.
David: But it's a great way to get more deals in the pipeline for ourselves, as well as something you could consider as well. If you have a big list or if you have deals. So--
Mike: Let's talk to the new guy.
David: I love that, yeah.
Mike: So the new guy, you're listening to the podcast, you have never done a deal before, you have nothing under contract, you don't have a big buyers list, how do you get started? Or how could I leverage the JV? How could I leverage a joint venture agreement? It's pretty simple, you go to somebody who has a property; another wholesaler. Again, they are trying to sell it, sent it out; you see them trying to sell a property. You're trying to sell that? I think I have a buyer for it. Whether you do or not, just be straight forward. Say, I don't know if I have a buyer, can I help you sell that property? Can I help you try to sell that property. They say yes, because they are trying to move it. If they are a wholesaler, they are the definition of a motivated seller. They got to sell it quick.
David: That's right.
Mike: Got to sell it quick at a discount-- they're motivated. So again, you go to them, ask if you can help sell the property? They say, absolutely. I recommend trying to get a JV with them, we JV with all of our partners because-- again it's the right way to do it, you actually have equitable interest and all that stuff. Get a joint venture with them, then you help market that property, try and find a buyer, just try and get in the game with that joint venture. If you bring a buyer to that wholesaler, they will be stoked and happy to pay you on that deal. It's as simple as that, you really don't have to go out and spend $1000, or $10,000 on marketing to get a deal done. The trick to this business is putting deals together, period.
David: I think another way to sum it up to the new guy would be, there are two ways to approach a JV in the beginning. There are really hundreds of ways-- but the two ways that I saw it when I first came into the game was; I can either leverage the marketing efforts of someone else with my buyers list, or I could flip that scenario around completely. I could leverage someone else’s buyers list with my marketing efforts. So if I have a property under contract, I knew a guy that had buyers in that area, I could take them to him and say, hey help me sell this and get the deal done. Vice versa, if I had a bunch of buyers in an area that's looking for a deal, but I had no deals in that area and saw another wholesaler marketing a deal in that area; I call that wholesaler and say, hey I see you have this property, and I have five or six guys that are beating down my door with now to get properties in this area, would you be interested in letting me help you sell it, then we could split the profits? The beauty of the profit split is that it doesn’t have to be 50:50. Typically we shoot for 50:50 or even 60:40. I have done deals where I have made 10/15% because there was maybe a daisy chance of joint ventures. Maybe three or four people involved in the transaction. Then you may have real estate commissions, who plays the closing costs? But so what? Typically whenever you do a joint venture, because you are leveraging someone else’s marketing, buyers list, energy, time and efforts-- that's kind of the thing, right? Typically the idea is to do less work.
Mike: So you're not doing all the work, you're not spending all the upfront capitates doing the marketing or whatever. So yeah, you are going to do less work and make a little less money. But you are going to make some money which is great.
David: We love joint venture agreements. Any property that you see on the DiscountPropertyInvestor.com-- if somebody comes to us and says, hey I have a buyer for this property, do you want to joint venture? Our answer 99% of the time is yes, bring me a contract. Why would we want to take the chance of not being able to sell that property, or have to wait? Time is money, so if someone is like, I can get you this deal sold tonight or tomorrow, versus us having to wait a week or two and maybe not even be able to sell it and back out, or whatever the case is. It limits your ability to make money and grow your business.
Mike: That's 99% true. I would say sometimes we do like to shop our properties ourselves, we want to maximize our returns and maximize our profits. We are not shy about partnering with people. Most people aren't, if they have a property they haven't moved for 5-7 days--
David: My favorite types of joint ventures are when another wholesaler contacts us and says, hey you are not marketing this up enough. I will say, okay bring me a contract.
Mike: Sounds good.
David: So they will market it up five or ten grand more, that increases the profit margin by five or ten grand more. You split it 50:50, I haven't made the same amount of money I would have made if I had found a buyer on my own, because they marked it up.
Mike: That's a win: win right there.
David: Very powerful, that's the main point here.
Mike: I think I know who you're talking about. I thinking we should have them as a guest on the show.
David: We should.
Mike: We will have to reach out to them and see if he's interested.
David: So joint venture contracts are very, very powerful. They are very simple agreements. The one we use is a one page agreement. I think it's in the FreeWholesaleCourse--
Mike: I am 99% sure it is.
David: So if you want to take a look at what we use, go to FreeWholesaleCourse.com, there is examples of contracts, joint venture agreement in there, assignment contract in there as well. The joint venture agreement is simply one page, and it basically lays out the terms of the deal. Just says, this is a property that I have under contract, that Mike is going to help me bring a buyer in for. In the event he produces a buyer, he is going to get X% of the profits on that particular deal. Typically our joint venture agreements are non exclusive.
Mike: That's a good point.
David: If I have the deal, then you come to me and say, hey I think I can help you sell it. But I sell it before you do, I’m not going to give you the portion that's agreed, because you didn't bring anything to the table. That is something we always do, we say it's not exclusive. So if you bring the buyer in this scenario where I have the deal, then I am happy to pay you.
Mike: Obviously you are going to get paid. But again, if you did nothing to procure the buyer, found a buyer completely outside your efforts-- try again. We will play on the next game.
David: Try again, that's right.
Mike: That's always my motto on wholesaling. That one didn't work, we're going to try again.
David: That's true. So yeah the joint venture agreement guys, very powerful. If you don't know, now you know. Check it out-- again you could probably go on Google and type joint venture agreement, real estate. Find a bunch of them on there as well if you don't want to use the one we're giving away for free on our course.
Mike: I think that's one of the things we talked about is we-- as a company, the reason we came together is because we saw some other guys doing deal, we were overlapping. Started out as a joint venture. We said, let's share some office space together, kind of a mastermind thing, we can do more deals just by being around each other and bouncing deals. Again, starting out with a much looser, less formal-- just joint ventures on several properties here and there is a great way to build a working relationship with someone.
David: So true.
Mike: You could say, well-- a joint venture for the next three months. If you are feeling comfortable with someone. Instead of getting married, just set up a joint venture.
David: We have one in place at the moment. We used to have one with this company that was like a national company. Anything that hit our website they had the ability to market, as long as they didn't undercut our value.
Mike: Right, they couldn't sell it for less, or market it for less than we are marketing it for.
David: If someone wanted to mark it up, by all means go for it. If they see their marketing and our marketing, it doesn't make us look bad. We didn't really care that they wanted to market it up. But at a minimum keep it at the same level we were at. They sold a couple of deals for us, but not that many. I think maybe two or three.
David: We don't have that agreement in place anymore because of the hassle. It was a way for us to reach a larger audience for our properties.
Mike: Again, I think this is another excuse buster type of topic or episode. If you don't have money for marketing, well listen; we just talked about a JV, go out there and talk to people. You can go network, get out there and try to put a deal together. Go do a joint venture. You don't have to find the seller; you don't have to find-- you have to find one and help put the deal together. If you do that and partner with people, write up a little joint venture agreement, you get paid, it's pretty simple.
David: One of the first real estate courses I bought on wholesaling about three years ago at this point, was-- about doing the exact same thing; reverse wholesaling for the noobie who didn't have a ton of cash to spend or invest into a marketing campaign, letters and Facebook ads, PayPerClick and all the stuff we do now. But basically it suggested to go find another wholesaler, get properties under contract, and just try and help him sell those deals. If you bring a buyer in on one of them, maybe you can get 40-50% of the profits on it. That's what I did in the beginning a lot. I still do it now. We come across people who have better marketing deals all the time. Our buyers list is very big, it's a mighty list at this point. All we do is just make that connection. Hey we got a guy that's got a deal here, buyer is looking for a deal there, and put them together and get paid. I love the joint venture agreement. It's a game changer.
Mike: Again, it could be a game changer for you. If you are out there and haven't done any marketing, go help put a deal together and you're going to get paid, or you should.
David: Keep it simple guys, don't over thing it. All you're doing is playing connector, just bringing in two different parties, or something three, four or five if you are daisy chaining. But you are just bringing people together-- you are providing somebody what someone else wants. You are just putting them together. Don't over think it, get out in the field, do some joint venture agreements.
Mike: I was going to say, you're pimping houses. Providing what someone else wants.
David: That's a good way to word it, I like it.
Mike: Okay guys.
David: Check out the joint venture agreement on the FreeWholesaleCourse.com. Until next time guys.