Joint venture Property Developments
A joint venture is an attractive option for both client and builder when the situation is right. If the client has mortgage, or no mortgage on the land and the client cannot fund the project on their own. In this situation, Tatra Built Vic can enter into alegal agreement with the client ( property owner ) whereby we will deliver the build component of the project for an equity share of the profits. This is a simple calculation based on the value of the land and cost of the build. Tatra Built Vic will handle all documentation i.e., town planning, building permits, project management, sales etc.
Here is an example below:
Youhave a block of land that is currently worth $850,000 and would like to enter a joint venture development project to build 3 town houses. The cost to build each of the 3 units is approx. $340,000.
- Land Value (held by the client): $850,000.
- Build Cost (funded by Tatra Built Vic): $1,020,000
- Total Project Value: $1,870,000
In this example the build cost is approx. 57% of the total project value and the land component is 43%. So, in this instance Tatra Built would receive 57% of the revenue and the client (landowner) would take 43%.There is 2% for management fees.
At the end of the project each unit sells for $850,000, giving a total revenue of $2,550,000.
- Total Revenue: $2,550,000
- Tatra: $1,453,500 (57%)
- Client: $1,096,500 (43%)
The attraction for the client to enter a joint venture is the ability to unlock the equity in their land, substantially increasing their profit (over just selling the property) and with the added security of dealing with a trustworthy builder like Tatra Built Vic who has a vested interest in delivering a product that will appeal to buyers and investors.
As a bonus, the client can also receive one of the units in the development as part payment, this may reduce taxation payment (speak to your accountant)also it may also reduce stamp duty payment to zero as the client is part of the development agreement. This can add $1000 to the clients profits.
If you would like more information on entering into a joint venture property development, then we welcome you to either email, or calland speak to usdirectly.