Taking the plunge: Key considerations for joint ventures with developers
Joint ventures between institutional investors and developers often present great opportunities for higher returns than stabilized properties. Like all relationships, however, there are pitfalls and challenges of which to be wary, and it is best to build the relationship on a stable foundation of communication and trust, as well as an equitable spread of risk and reward.
The following are some of the matters investors should carefully consider before entering into a joint venture with a developer.
Choose the structure
Unless there are particular tax concerns, the majority of joint ventures are structured as limited liability companies or limited partnerships. Limited liability companies are the simplest to form and provide the benefits of limited liability to their members while also offering flexible management and operation rights. Besides determining the best investment vehicle for a venture, an additional threshold matter to be decided is wh