The Various Roles in UK Joint Venture Land Investments
Real Esate Listings, Real Estate Listing Service, Property Investment
The advantages of investing through a joint venture partnership include reducing risk and acquiring the knowledge and skills of other partners.
A huge portion of wealth in the UK and across the globe, today and historically, comes from real estate. What’s less understood, however, is that modern investing in land is often done through joint ventures; in the past it was more of a single-family pursuit, largely those with noble titles. This means that an acquisition and development today are done with teams of people with different assets and skills that, ideally, complement each other.
The simplest means of dividing up the roles is there are funders (investors) and there are property fund managers. Most (but not all) investors have minimal experience in strategic land investing, particularly where it comes to site assembly. This is the process by which raw land is transformed by way of a use designation change, granted by local planning authorities, and where the site is designed and where supporting infrastructure is built. These require specific skills and experience.
The investor obviously provides the financial capital to enable the purchase and transformation of the land. But rather than being completely passive in the joint venture, an investor is advised to engage in the following:
Objectives - Know what the development is about and what factors suggest it will succeed. Real asset portfolio investing typically entails accounting for physical features, such as the location of the site relative to workplaces, transport, schools and such. With a raw land conversion to housing, the local economy and job growth in particular play an essential role.
Timing - Ask how long it will take from start to finish, the end point being when land is sold to homebuilders who complete the task (this process is commonly split between site assembly and construction to amortize risk and to allow experts to complete the project phase they know best).
Relationships - Are the fund managers familiar with local entities such as employers, planning authorities and other political leaders? What about other funders? Do the managers have investors who roll from project to project, clearly pleased with asset growth?
Reporting - Periodic updates on progress are to be expected. There are multiple milestones to be met and investors should be informed if they have or have not been achieved and why.
Profit sharing scenarios - What is the potential return on investment? How might that goal not be met?
Regulatory and tax issues - Some projects are subject to taxation while others may benefit from Government programmes that actually reduce costs to the venture partners. This can usually be determined in advance.
Exit routes - How liquid is the investment? Is the JVP structured such that it is illiquid up to a certain point? When would it be optimal to make a withdrawal, as allowed?
One final point: an investor should always engage a disinterested party to provide an objective viewpoint. This is where an independent financial advisor is highly recommended. They can examine a single investment as well as an entire family portfolio, considering all relative factors.
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