Francois Lanthier
Daniel: Good afternoon, everybody. We are talking this afternoon with Francois Lanthier. He has a very interesting Top 10 List.
François: It’s a Top 10 - What NOT to Do as a Joint Venture Partner
1. Don't do a joint venture with just anyone. I get calls every day from people saying they want to do a joint venture with me. But I want to get to know them first.
Joint ventures can go bad very quickly, and it can last for years. So think about it. Really vet your people. Do you like to work with this person?
2. Don’t go in without a plan. Joint venture partners are awesome, but if you start renovating and there's no plan, it can go bad. Your budget can run over. You need to have a solid plan. That’s a big one for JVs because you are managing your money and someone else's money.
3. Don’t get caught up in the hype. People get excited, but then they don't think about all the details. You need to do your due diligence. So what's involved in a JV? It's not just a big party, there are challenges. So don't get caught up in that.
4. Don’t forget an exit strategy or strategies. If you buy a property as a joint venture, it's very important to have exit strategies. Can you refinance? Can you pull out of the deal? Can you pivot and turn a rent-to-own into a long-term rental or Airbnb? So exit strategies may not always mean exiting the joint venture or the property. It could mean pivoting or switching strategies.
5. Don’t buy just for the sake of buying. I see a lot of new people buy random stuff and there's no value add. You have to be careful and really analyze what you're buying. Don't just buy for buying; Buy with a plan.
6. Don't enter a JV without a signed agreement. That’s a big no-no! A lot of people do JVs without signing a JV agreement. Would you buy a house without signing a contract? You need to have a written agreement for many reasons.
What if you die? Who will know anything about this deal if it's all verbal, or a handshake, or emails? An agreement is essential.
7. Don’t leave roles undefined. A lot of people do joint ventures, but they don't define who does what. An agreement will help with that, for sure. But it's also important to have meetings. Who calls for roofing? Who manages the daily or weekly budget? It's very important to define those roles, otherwise you're overstepping can cause some friction.
8. Don’t compromise your goals. You have to be firm. Let's say the goal was to earn a $500 a month. That should be your goal and it should stay. Otherwise it changes the JV and one of the partners could be unhappy unless it's mutual and agreed upon.
9. Don’t exclude capital expenditures. Many people don't think about capital expenditures, like emergencies, fire, or whatever. We have insurance, but it’s important to have a reserve fund, especially for a joint venture – a pool of money where one or both partners contribute. And it's an it's built into the agreement. You never know, appliances die, the roof leaks…Who knows what's going to happen?
10. Don’t leave out a lawyer. It’s important to have a lawyer review the joint venture agreement, especially if it's your first time with a partner. It's not cheap, but it's really worth it. One little word, or the Oxford comma, could cost you thousands of dollars. There's a lot of variables that we don't know.
Daniel: Anything else?
François: Something else I always include is life insurance. I know that's very dark and sad to think about what happens when a partner dies, but it could happen. It creates a probate tax or deemed disposition. And there could be tax implications, legal fees…all kinds of things.
Daniel: How can people find you? How do people connect with you?
François: The easiest way is www.thereiteclub.com under Find a Friend. I'm also quite active on social media, so Facebook, Instagram, LinkedIn, Twitter, YouTube…I'm on most platforms.
Summary of Top 10 What Not to Do as a JV Partner;
1. Don’t do a joint venture with just anyone
2. Don’t go in without a plan
3. Don’t get caught up in the hype
4. Don’t forget an exit strategy
5. Don’t buy just for the sake of buying
6. Don’t enter into a JV without an agreement
7. Don’t leave roles undefined
8. Don’t compromise your goals
9. Don’t exclude capital expenditures
10. Don’t leave out a lawyer
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