How To Structure A Joint Venture

[CondoSeeker2012]

My partner and I have a combined income of 7k

We are looking to purchase our first property, a condo for investment purposes and not to live in, hopefully a RCR, 1-2bdr

Downpayment wise, we have been given 100k and 50k by 2 benefactors respectively who are interested to invest with us, on our side we have cash 50k total making up 200k. Monthly payments will be made by us.

We retain control on property and will be able to make decisions on how to exit.

Was hoping to get advice from old hands here on how we should approach this arrangement to manage the cashflow from rent upon TOP and eventual exit? Do we return investors' share of the rent? And if yes, what exactly will be their share?

Thanks!

[ikan bilis]

ummm.. don;t know... but may be...

let's say condo at S$1mil....

partner #1 (came out cash 100K) shares of 10%, 100K/1mil
partner #2 (came out cash 50K) shares of 5%, 50K/1mil
you +wife (came out cash 50K+800K loan) shares of 85%, 850K/1mil

all rental income, expenses, tax shared in that ratio...
(but partner #1 & #2 might be "boh-hua", got to make sure you do not default bank loans)....

:rolleyes:

[Laguna]

Don't get into this agreement. It is only good when market is up. But when market is down....all turn ugly.

Also, also not fair for the one using their names
1. need to pay ABSD for subsequent properties purchases
2. need to pay personal income tax

Well, u can have a side agreement.

I know of cases like that, during crisis, the one who legally own the property end up in shit

[Secretariat]

If I stay within the boundary of your question, the structure should be:

Initial Cash: $200,000

Partner 1 (50%) Partner 2 (25%) Partner 3 (25%)
Partners 1 & 2 are the benefactors.
Partner 3 is either you or your wife, one person will do.

An All-Cash agreement. This means that the servicing of the loan until TOP (actually until you get a tenant) is all by cash contribution from the 3 Partners.

So, setup a bank account, called this a Reserve Account or whatever you like. The cash contributions go here.

Any surplus of Rental Income over Monthly Mortgage also goes into this account.

Any expenses incur, such as shortfall because of in between tenancy, property tax, misc expenses for repair also takes from this account.

Shareholders can decide when to make lumpsum payment from the account.

When property is sold, the net proceed plus Reserve Account balance is split according to shareholding of 50:25:25.

For this to work, your partners must be good.

Finally, Caveat Emptor.

[leesg123]

yes, to work out the % of ownership, u would need to have the intended price first. as this will influence how much worth the initial seed money of 50k and 100k are worth.

[buttercarp]

How come I find this TS familiar....... Spouse n him have combined income of 7k.........
Then got benefactors who let them do what he wants.......

[CondoWE]

How come I find this TS familiar....... Spouse n him have combined income of 7k.........
Then got benefactors who let them do what he wants.......

Smell fishy?

[stiook]

Do you have a cat? :cool:

[ikan bilis]

How come I find this TS familiar....... Spouse n him have combined income of 7k.........
Then got benefactors who let them do what he wants.......

differences....
- dual-key can fit 9-10 persons vs mm
- 1st property vs 2nd property
- one no need to talk about "partnership", so complicated...
- FH+GoodSchool vs non-own-stay

you happy now ??... :rolleyes:

[Sleepyhead]

Do you have a cat? :cool:

One that is YOWling very loudly about going off on a TANgent?

[CondoSeeker2012]

differences....
- dual-key can fit 9-10 persons vs mm
- 1st property vs 2nd property
- one no need to talk about "partnership", so complicated...
- FH+GoodSchool vs non-own-stay

you happy now ??... :rolleyes:

Thanks for explaining, I seem to have attracted some attention for my question. I sense it has something to do with this 'yowetan' person whom I've come to realise that this forum dislikes.

Thanks also to the kind old hands who provided their opinions.

Some background to this is the benefactors are not in for hardcore returns but rather 2 people who are helpful to lend a hand to purchase our first property. I am seeing how we can structure the JV such that they will come away from this loan with a small bonus instead of just an interest free loan to us.

I am also looking to see where I can find historical launch prices of condos to compare their then and now prices. This will help in the decision making process on which property to go for. Can the old hands once again help me out here please?

Thanks!

[ikan bilis]

hi,...

me made the assumption of the "2 benefactors " as your parent and in-law... and you comeout another 800K bank loan for a S$1mil condo,....and i would suggest...

- profit/loss, expenses, tax, rental income, all as 85%:10%:5%
- but when you sell your property, first 50K+25K=75K of profit goes to the 10% and 5%... remaining profit, if any, after 75K shared as 85%:10%:5%
- if losses then shared according to the 85%:10%:5% ratio...
- management of the property job all handled by you (renting out and etc)

you need to disclose your relationship with your "benefactors"... so that the other guys could help you to "think/suggest"
and check with the other forumers suggestion also... some times this small fish brain don;t work very well...:(

wish you luck !!... :rolleyes:

[Secretariat]

ummm.. don;t know... but may be...

let's say condo at S$1mil....

partner #1 (came out cash 100K) shares of 10%, 100K/1mil
partner #2 (came out cash 50K) shares of 5%, 50K/1mil
you +wife (came out cash 50K+800K loan) shares of 85%, 850K/1mil

all rental income, expenses, tax shared in that ratio...
(but partner #1 & #2 might be "boh-hua", got to make sure you do not default bank loans)....

:rolleyes:

I see...So the shareholding should be 10:5:85 ?

So if something has gone crazy, and the valuation of the unit bought doubled at the time of TOP, you get 85% of the profit if the shareholders agreed to sell?

And if something has gone crazy, and the valuation halved at the time of TOP, you bear 85% of the loss if the shareholders said "tak boleh tahan" and agreed to sell?

[ikan bilis]

I see...So the shareholding should be 10:5:85 ?

So if something has gone crazy, and the valuation of the unit bought doubled at the time of TOP, you get 85% of the profit if the shareholders agreed to sell?

And if something has gone crazy, and the valuation halved at the time of TOP, you bear 85% of the loss if the shareholders said "tak boleh tahan" and agreed to sell?

- when in "Joint Venture"... a lot of things become complicated...
- and in this case, he is paying the monthly instalment, not every partner form a company and get a company loan...
- the other partner could come out 100K cash which is more than his 50K,.. so why not "the other partner" be the lead investor and take the bank loan himself ??... (or he cannot take loan ??..)
- "negotiation" of term and conditions in this type of deals also complex, and you can fight for more benefit if you got more "muscles".... and if you got less muscles and dying to own that property, then you got to sweeten the deal...

- if parents sponsoring, that would be simpler... we have to know the relationship of partners before could make any suggestions....

- personally, i will never go into this type of deal, whether be a lead investor or sleeping investor....

:D