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JohnHanlin.com
Commercial Property Joint Ventures
JV's
Passive Income - Silent Partners
Investing in commercial property can be very rewarding and is one of the best ways for investors to create high yield "passive income". In fact, it is one of the most lucrative forms of real estate investment.
And the type of commercial property investment with the best combination of passive income, return on investment and investment security is: investing as a "silent partner" in commercial property joint ventures.
Want to earn more and work less? Keep reading...
What is a Joint Venture?
A joint venture is a contractual business association of two or more parties engaged in a common commercial enterprise.
Joint ventures are among of the most powerful tools available for shaping success in today's competitive business environment. Individuals or companies enter joint ventures in order to share strengths and resources, minimize risks, and increase competitive advantages in the marketplace.
A joint venture can take the form of a new business entity or a collaboration between businesses. In a collaboration, for example, a commercial real estate developer may contract with a landowner; the former providing the know-how and the latter providing the resources for a new commercial property development.
Want to know where I invest in Joint Ventures? Get a copy of my PDF "7-Step Guide"
Joint Ventures vs. Partnerships
A joint venture is similar to a business partnership, with one key difference: a partnership typically involves an ongoing, long-term business relationship, while a joint venture is based on a single business transaction or investment.
Joint Venture Agreements
A joint venture is created when each of the prospective members enters into a contract or agreement that defines their combined objectives and individual responsibilities. The joint venture contract is important for avoiding trouble later.
Joint venture agreements define specific member rights and responsibilities. Each of the members has a right to participate in the management of the enterprise, to share in the profits, and the responsibility to share in any losses that the joint venture might incur. In addition, each member has a responsibility to act in good faith in all matters that concern the mutual interests of the joint venture.
A joint venture can be terminated for several reasons :
- A date specified in the joint venture agreement.
- Completion of the joint venture's purpose.
- Death of an active member if so specified in the agreement.
- By court ruling related to member disagreements.
Clear here to view an example of a joint venture agreement form
EXCEPTION: Silent Partners
An exception to the rules regarding joint venture agreements pertains to silent partners membership.
Silent partners definition: Business partners who provide capital but do not actively participate in the management or operations of the enterprise or investment.
As it pertains to joint ventures, silent partners are joint venture members who contribute investment capital, share in its profits and losses, but are not involved in the management or operations. Typically, silent partners are individuals or businesses strictly interested in a joint ventures for "passive income." (see below).
This is how I prefer to invest my money in commercial property investments.
Passive Income
According to InvestorWords.com, passive income is defined as: "Income derived from real estate and business investments in which the individual is not actively involved, such as a limited partnership."
Essentially, passive income, is income that doesn't require your direct involvement. This fits perfectly with our description of silent partner membership in a joint venture as discussed above. Other forms of passive income that you may be familiar with include: owning rental properties (if you have a property manager), royalties from an invention, multi-level marketing, etc. If you want to earn more and work less - passive income should be a focal point for you.
There are two basic forms of passive income:
Residual Income
Residual income is any payment system where you receive regular, ongoing payments as a result of a single sale, activity or investment -- with little or no further effort required once the initial sale, activity or investment has been made.
- Insurance agents who earn annual commissions when clients renew their policies.
- Internet marketers who sell their products directly from the websites they create.
- Recording artists who receive royalties for their music when it's played and sold.
- Multi-level marketers who earn $ when their direct customers reorder products every month.
Leveraged Income
Leveraged income leverages the efforts of other people and businesses to create income for you. Examples of leveraged income include:
- Silent partners in a commercial property joint venture. (See above).
- General contractors who employ sub-contractors to do the work.
- Franchisers who sell their business models to franchisees.
- Multi-level marketers who develop downline organizations.
- Internet marketers who sell their products through affiliates online.
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