How To JV Wholesale Deals: Start Closing Deals With Our 6-Step Process

Real estate wholesaling, in all its glory as one of the preferred short-term investment strategies, means you must be able to act and close quickly. In the real estate joint venture (JV) wholesaling sector, the importance of partnering with the right person cannot be overstated.

In this article, we will discuss the ins and outs of JV wholesale deals including:

• What Does JV Mean In Real Estate?
• What Is JV In Wholesaling?
• What Is A Wholesale JV Agreement?
• How Do You Get A JV Wholesale Deal?
• How To JV A Wholesale Deal? (6 Steps)
• What Are The Benefits Of Joint Venture Wholesale Deals?
• How To Find A Wholesale JV Partner
• What’s The Difference Between A Wholesale Deal And A JV Deal?
• Final Thoughts

Many real estate agents, entrepreneurs, and investors choose to work as part of a professional team. A well-crafted group of wholesaling professionals offers support and guidance while creating a platform where each venture member’s skills and talents can be shared for the benefit of the venture and its affiliated members.

In wholesaling, the ideal partner would supplement skills you have yet to acquire or skills you want to sharpen.

What Does JV Mean In Real Estate?

A Joint Venture (JV) is a strategic business relationship where multiple parties, typically real estate investors, come together to pool their resources for a specific real estate project. This collaboration allows each participant to maintain their distinct business identity while leveraging the combined strengths of the group.

The concept of a JV in real estate is distinct from a partnership.

In a partnership, investors form a single business entity to conduct operations collectively, whereas, in a joint venture, each investor retains their individual entity status and collaborates on particular projects.

A joint venture often lies in the complementary needs and assets of the involved parties. For example, one party may possess substantial financial resources but lack local market expertise or operational experience. Another party might bring in-depth knowledge of the local real estate market or specific management skills, thus balancing the equation.

Example Of A JV In Real Estate

For this example, consider the case of "Alpha Realty Group," a major real estate firm with a significant landholding in San Francisco, yet headquartered in Chicago.

Alpha Realty Group, while financially robust, lacks intimate knowledge of the San Francisco market. To bridge this gap, they enter into a JV with Emma, a San Francisco native who has an extensive understanding of the area, especially the neighborhood surrounding Alpha's property.

In this collaborative arrangement, Alpha Realty Group brings the necessary financial backing to the table, while Emma contributes her invaluable local expertise and insights. She plays an integral role in guiding the development of the project, ensuring its alignment with local market dynamics.

Joint ventures like this are pivotal in the real estate sector, particularly for ambitious, large-scale developments. They facilitate the merging of diverse assets, including financial investment, experiential knowledge, professional networks, and area-specific acumen.

This collaborative approach significantly bolsters the likelihood of a project's success. The essence of a real estate JV lies in creating a symbiotic relationship where participants can leverage each other's strengths and compensate for their limitations, working towards a shared objective with enhanced efficiency and effectiveness.

What Is JV In Wholesaling?

A joint venture (JV) in wholesaling is essentially a business arrangement in which two or more wholesalers or other real estate investors pool their resources and talents to accomplish the task of wholesaling a property for a profit.

The participants in a joint venture are responsible for profits, losses, taxes, and expenses. Again, the joint venture stands as its entity–apart from the venture member’s other businesses.

While a joint venture can be a partnership, it does not have to be, but many people mistakenly believe that a joint venture is a term that can be used interchangeably with the concept of a partnership.

A wholesaling joint venture commonly includes one member with a wholesaling background and a knack for finding viable wholesale opportunities joined with another who is either well-connected to other investors or has built a curated buyers list through experience and innovation.

Joint ventures, when wholesaling houses, can be formed with other legal business structures. These include:

• Individuals
• Limited Liability Companies (LLCs)
• Partnerships
• Corporations and other business entities.

Combining resources can be an intelligent approach to investing because this type of business relationship has the unique opportunity to pair complementary talents. And, depending on its defined structure–a joint venture offers financial protection and potentially superior tax structures to its members.

What Is A Wholesale JV Agreement?

A wholesale JV agreement is a fancy legal/investment term for what is more often known as co-wholesaling. It refers to the combining of efforts and resources to achieve a common purpose.

Regardless of the legal structure used to form the JV, the governing or leading document is typically the wholesale JV agreement. The wholesale JV agreement details each of the partner's rights and obligations concerning the venture.

Each state sets forth specific regulations that define its jurisdiction’s acceptable joint venture agreement protocols. This legal agreement includes many details and relevant factors that include, among others:

• The mutually agreed upon purpose of the joint venture.
• The initial contributions of the partners.
• The ownership splits.
• The management of the daily affairs.
• The right to the profits.
• The responsibility for losses and the payment of taxes.
• The term and termination
• How will the JV end?
• Is it defined by the completion of a goal or a predetermined time limit?

It is important to seek legal guidance from a qualified real estate lawyer when drafting or signing a Joint Venture Agreement. The JV agreement should define, clearly and transparently, the important aspects of the venture to avoid costly as well as time-consuming potential litigation in the future.

To ensure JV wholesalers operate within the relevant jurisdiction’s laws and regulations, it is important to -

• Become and stay current with real estate and business regulations.
• Choose industry-endorsed documents and templates to avoid unnecessary conflict and confusion.
• Use a joint venture agreement to ensure the transparency and clarity of each wholesaler’s obligations, ownership levels, and contributions are memorialized in writing.

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*Before we continue our guide on JV wholesale deals, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!

Host and CEO of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!

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How Do You Get A JV Wholesale Deal?

When a joint venture entity in the wholesale real estate market finds a property that meets its preset investment benchmarks, it executes a purchase contract with the seller for a sale at a specified price and within a defined period.

Upon signing, the buyer (i.e., the Joint Venture as an entity) provides a small EMD – earnest money deposit as a show of good faith as a buyer. However, the JV’s goal is to locate another buyer for the same property before the existing real estate contract’s closing deadline arrives.

A JV wholesaler can use the legal instrument - an Assignment of Contract, to assign the JV’s equitable interest (their right to purchase the property) to the property to alternate cash buyers.

This legal right to purchase is granted by the legal concept known as the Principle of Equitable Conversion. The difference between the purchase price of each deal would equal the JV’s gross profit. 

However, successful JV wholesaling begins with finding the right property. Consider the following tips when searching for wholesale properties with motivated sellers:

• Driving For Dollars
• Join Meetups & Other Real Estate Networking Events
• Find Wholesale Properties Online

Driving For Dollars

The primary objective of driving for dollars is to sniff out potential properties by driving through and noting (in an organized way) properties that may meet the JV’s established wholesaling criteria. This property-hunting technique has been used for ages and remains effective despite the fact it fails to fall within the modern digital real estate business model.

But driving for dollars works, and is cost-effective.

 Driving for dollars is an effective way to get a JV wholesale deal–probably in a neighborhood that is near your home, which adds convenience. Classic signs to look for when include:

• Boarded up doors and windows.
• Broken doors or windows.
• Property that shows water or fire damage.
• Signs of poor management like unkempt trash receptacles.
• Untidy and overrun bushes & weeds around the house and across the yard.

If a neighbor happens to be outside, see if you can get their phone number and chat them up a bit. Maybe they can offer some information regarding the property. Remember they have a significant personal interest in the neighborhood’s devaluing eyesore - the potential wholesale deal.

Join Meetups & Other Real Estate Networking Events

Finding your first and subsequent JV wholesale deals requires good old-fashioned networking. While the digital marketplace has altered the real estate industry, there is still a sizeable social factor associated with a successful career as a real estate professional.

Most communities have local or virtual networking events, real estate meetups, or real estate investment clubs – with knowledgeable and helpful members who share similar interests and real estate goals.

Find Wholesale Properties Online

The internet, as one would expect, offers many access points that lead to potential JV wholesale properties.

• Scour the internet for expired listings. An expired listing refers to property that was once listed with a real estate broker or real estate agent. Additionally, property records for wholesaling deals are available to the public; however, they are now even easier to access online.
• Your local multiple listing service (MLS) is one of the most consistent places to find potential wholesale properties online
• Create a website dedicated to the JV wholesale venture – a simple online presence offers excellent and affordable real estate marketing possibilities.
• Check out the Vendor Resource Management website of the U.S. Department of Veterans Affairs.

How To JV A Wholesale Deal In 6 Steps

Wholesaling real estate as an investor is a great way to enter the marketplace without a lot of money, as most wholesale transactions require only a small escrow deposit.

Joint venture wholesaling begins by searching/locating a potential property. After negotiating with the seller, the JV wholesaler executes a purchase contract to buy the property at a specific price within a defined timeframe.

The joint venture’s “right to buy” (a.k.a., its equitable interest) becomes the legally marketable asset upon which the wholesale transaction hinges. The ‘right to buy’ is awarded by the legal Principle of Equitable Conversion.

A JV wholesale real estate deal resembles any other wholesale transaction, except it includes a few unique steps:

1. Know The Rules That Govern Real Estate & Joint Ventures
2. Understand Your Real Estate Marketplace
3. Know How To Recognize A Promising JV Wholesale Deal
4. Find A Property Worth Wholesaling
5. Negotiate & Execute The Contract
6. Exiting The JV Wholesale Deal

Read Also: Wholesaling Real Estate: Step-by-Step PDFs [FREE DOWNLOAD]

1. Know The Rules That Govern Real Estate & Joint Ventures

Real estate law is strict as it is designed to protect the public. States require real estate professionals to become licensed if they wish to work (sell, list, or market real property) in its jurisdiction, unless the person happens to be the principal owner/seller.

However, a wholesaler, when assigning their “right to buy” to another buyer, is not acting in a way that would rise to a level that would require a state-issued real estate license. This is because when wholesalers market or sell equitable rights, they are not marketing or selling the real property but another asset – their equitable rights. 

While the above differential may appear as minor, in real estate law, this distinction should be considered the legal line in the sand.

With its great popularity, wholesaling has caused quite a stir in an evolving real estate landscape. Some states have adopted new laws that impact the ways in which wholesalers may operate.

• Illinois
• Philadelphia
• Oklahoma

Read Also: Is Wholesaling Real Estate Legal?

2. Understand Your Real Estate Marketplace

While real estate can be understood in broad statistical strokes covering states or even countries, each real estate market is unique – offering something different and special from surrounding markets. This is the information that may be particularly helpful.

New wholesalers will find a joint venture offers a great platform on which to learn how the real estate wholesaling business operates. It offers this experience while allowing you to participate in a transaction with the potential to earn a profit.

*Pro-Tip: Market knowledge is critical to successfully navigating your way around wholesale opportunities that you would be better off avoiding.

3. Know How To Recognize A Promising JV Wholesale Deal

A joint venture wholesale transaction’s profit is defined by the difference between the original agreed-upon purchase price and the sales price a subsequent end buyer is willing to pay.

Professional wholesalers typically create an investment model to measure the potential of a wholesale deal. Some analyses are quite complex–using real estate comps and similar properties in valuating; however, there is no need to complicate the process.

The 70% Rule

In general, real estate investors who specialize in wholesaling and flipping houses tend to follow the 70% Rule. This rule is considered the Rosetta Stone, upon which much of the industry's professional opinion rests. 

An example that applies to both wholesaling and joint venture wholesaling should help clarify the concept -

A wholesaler finds a motivated seller who is interested in selling their small home in an up-and-coming neighborhood - quickly. The asking is $180,000, which is priced below market value. In your professional view, someone with a knack for fixing and flipping could renovate and resell the property for $400,000 at current market prices.

For the wholesaler, the estimated value of the subject property (of $400,000) - after its updating and renovation, is referred to as its After Repair Value (ARV).

The end buyer of a JV wholesale deal is likely to be a real estate flipping specialist – who also employs the 70% Rule to determine the maximum amount they would be willing to pay. However, a fix and flipper’s analysis would also include another investment metric/concept known as a maximum allowable offer (MAO) in the final analysis.

In the above example, 70% of the ARV would be $280,000 (or $400,000 x 70%). This is the cash buyers’ starting point.

Note, however, that a cash buyer’s Maximum allowable Offer subtracts potential carrying, renovation, and closing costs. Ultimately, a house flipper optimizes their offer to an amount that subtracts anticipated expenses.

If the cost to carry and renovate the above example is $80,000, the flipper’s MAO calculation would be as follows:

$280,000 (70% of the ARV) - $80,000 (Expenses) = MAO of $200,000 

This analysis reveals about a $20,000 potential wholesale profit, which is probably less than the deposit required to start the JV wholesale deal.

4. Find A Property Worth Wholesaling

Each real estate investment starts with a property that has potential – as defined by your wholesale investment model. When looking, consider these resources:

• Online websites dedicated to pre-foreclosures, foreclosures, and auctions.
• Expired listings.
• Off-market properties
• Small local marketing efforts, like bandit signs.
• Family or Probate Attorneys.
• Networking with other professionals at meetups or events.
• Driving for Dollars.
• Podcasts specializing in wholesaling and co-wholesaling.
• Paid Data Resources.

 

5. Negotiate & Execute The Contract

When an investment opportunity presents itself, wholesalers must understand that competition in the marketplace can be strong, especially for a property with real potential. In other words, a wholesaler cannot dawdle and be ready to decide and act quickly.

The first step is to negotiate with the property owner to determine the price, timing, and other transaction specifics.

At this point in the process, if the joint venture is to have the legal capacity to enter a real estate contract as a wholesale buyer, each joint venture partner must have appropriately executed a JV contract or agreement that complies with relevant law.

Wholesaling requires the execution of a legally enforceable contract of sale, so if you are unfamiliar with the contract’s language (or legal consequences), it is prudent to reach out for legal guidance.

Read Also: Wholesale Real Estate Contract Template & PDF [FREE DOWNLOAD]

6. Exiting The JV Wholesale Deal

There are two primary real estate exit strategies for wholesalers working as a joint venture entity. Each closing strategy requires the JV to find an end buyer.

Assigning The Contract Before Closing Deals

In the assignment exit strategy, the wholesaler enters into a purchase and sale agreement but never takes title; instead, they assign their Equitable Interest/Title to another buyer at a higher price using an assignment of contract. In this exit strategy, there is never a need to find capital from available lenders.

The difference between the original contract’s purchase price and the assignment’s price tag is the wholesaler’s gross profit.

The Double Close Strategy

Using the double closing exit strategy requires the joint venture to enter a real estate purchase contract, but the difference is that they take the title by closing on the first contracted wholesale deal.

Typically, a JV wholesaler’s property ownership is temporary and may only be for a day or an hour. The double close requires additional closing costs, but the extra expense provides extra legal protection. This is because there can be no question as to the fact that the wholesaler is a principal owner/seller and in need of no license.

What Are The Benefits Of Joint Venture Wholesale Deals?

JV wholesale deals offer several benefits, making it an attractive strategy for investors and professionals in the real estate industry. Here are some key advantages:

• Risk Distribution: One of the primary benefits of a JV in wholesaling is the distribution of investment risk. By pooling resources and expertise, the involved parties can mitigate individual risks, making it a safer venture for each member.

• Leveraging Resources and Talents: A JV allows for the combination of diverse resources and skills. Participants bring their unique backgrounds, experience, and expertise to the table, creating a team with a comprehensive skill set that can navigate complex market scenarios more effectively.

• Access to Complementary Resources: In a JV, each member contributes something unique, whether it's market knowledge, financial resources, or specific skills. This complementary nature of resources ensures that the venture is well-rounded and resilient.

• Economies of Scale: By working together, JV partners can achieve economies of scale, leading to cost efficiencies. This is particularly beneficial in real estate wholesaling, where scaling up operations can significantly impact profitability.

• Expanded Network and Opportunities: A JV naturally extends each member’s professional network, opening doors to new opportunities and contacts that might otherwise be inaccessible.

• Shared Knowledge and Learning: Engaging in a JV allows participants to learn from each other, gaining insights and knowledge that can be invaluable for future individual ventures.

• Flexibility and Agility: JVs in wholesaling offer more flexibility compared to other investment formats. Partners can quickly adapt to market changes or shift strategies as needed, thanks to the diverse perspectives and agility of the team.

• Enhanced Credibility and Market Presence: By combining forces, JV partners can enhance their credibility and presence in the market, attracting better deals and opportunities.

These benefits make joint ventures an appealing strategy for those looking to maximize their impact in the real estate wholesaling market, allowing for a more collaborative, resourceful, and dynamic approach to investment and property turnaround.

How To Find A Wholesale JV Partner

Allying within the real estate wholesaling arena is common, but it does require a certain degree of due diligence when searching for someone who will become a trusted member of your wholesaling joint venture.

There are always professionals or mentors, who offer great insight and experience, but their services can be a bit pricey, especially for those new to real estate wholesaling. For a simple start, become a part of the local real estate community, participate in business and community events, and get to know property owners and colleagues.

There are also real estate investment clubs designed for local investors, contractors, agents, and wholesalers to gather and share their experiences with like-minded investors.

Ultimately, the joint venture wholesaling partner you choose must be trustworthy, and reliable, and bring something to the venture that helps it to reach its goal.

An attorney can help evaluate potential real estate venture partners through a variety of background checks and investigative techniques. An experienced assessment by a legal professional can offer a well-informed decision that may help avoid future legal conflicts while providing peace of mind.

Wholesales Deals vs. JV Deals

There is one fundamental difference between a traditional wholesale deal and a JV deal. Each type of wholesale transaction requires the same steps; however, in a JV wholesale deal, the contracted buyer would be the joint venture, as an entity.

So, instead of having one buyer, there may be two or more (individuals or companies) that are legal buyers. 

The Joint Venture Agreement Is Also Known As The JV Wholesale Contract

A JV wholesale deal includes a minimum of two venture partners. The joint venture is typically managed (and defined) by the rules outlined in a legal contract known as a joint venture agreement (JV Agreement), a legally enforceable document.

While the JV wholesale contract can be oral (like any contract), it is highly recommended an agreement be in writing to ensure it is legally enforceable.

Each state sets the guidelines that a joint venture must follow.

JV Wholesale Contract PDF

Use this example of a joint venture wholesale agreement template to use when co-wholesaling deals with other wholesalers.

When business and money are involved, be cautious and protect your interests with legal guidance and the proper paperwork which may include –

• Joint Venture Agreement
• Purchase and Sale Contract
• Assignment contracts, to name a few.

Final Thoughts On JV Wholesale Deals

There are many reasons why wholesalers choose to close transactions using a joint venture. JV wholesale deals offer investors a way to pool their resources cost-effectively. With the digital marketplace, the concept of JV virtual wholesaling houses has become another offshoot for those who wish to wholesale beyond their local market.

If you’re looking for a step-by-step process to help you start and grow your wholesaling business without spending a dollar in marketing, check out our brand-new free training and start scaling your real estate business today!