BY JANE SLACK-SMITH
I confess I’m a child of the 80s and the Pet Shop Boys – despite what we think now – were musical gods. One of their songs stated “You’ve got the brains, I’ve got the looks, let’s make lots of money”.
I cringe whenever I attend a course where the organiser says: “In this room there are those of you with no time, but a good income and savings, and others who have time on their hands and lots of creative flair – why not get together and start a joint venture?”
To be honest, I work with people who have set up joint ventures with friends, siblings, parents etc and all I can say is, if you are even considering going into a joint venture arrangement, go in with your eyes wide open and a very thorough letter of agreement in place. Even those who know each other extremely well can start feeling the relationship is wearing a little thin after a while.
Let’s face it, at the end of the day most often one person is slaving away in an 80 hour a week job a bit miffed that the other is out wandering around selecting paint colours, while the person on the ‘renovation front line’ is fighting with tradespeople, balancing project management demands and selecting colour schemes, all the while imagining the other guy is sitting in a comfy air conditioned office sipping lattes.
Even if you make money out of the deal it can still end in tears and recrimination. So who really put in the most effort, the guy with the ‘brains’ in the office or the person with the ‘looks’ (read creative flair) out there?
To complicate things even further, if you do this with a large group of people – family or friends – then be prepared. A common theme is to buy a block of units and strata them. However timeframes usually blow out, getting agreement on all the finer points is challenging to say the least, and deciding whether the unit on the top floor has more value than the one with the garden can cause more than a few disagreements.
And if that’s not enough, invariably something then goes wrong and someone has to sell up quickly. What do you do? Well the agreement (you all signed at the beginning – you do have one don’t you?) should state clearly what happens if someone needs to sell. Is it offered to the others first or does it go on the open market? Does that person get any recognition (compensation) for where the project is currently up to or do they only recoup their initial investment?
Joint ventures can be complicated and I am nothing if not an adroit risk manager. So regardless of whether you’ve got ‘the looks’ or ‘the brains’ (or both), my best advice is to go in with your eyes open and despite how close you are with your friends try to keep friendship and business separate – or it may end in tears.
Jane Slack-Smith is the director of Investors Choice Mortgages, a mortgage broker and property educator.