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JV Costs & Where to Start

Discussion in 'Legal Issues' started by Mick Butterfield, 21st Sep, 2016.

  1. Mick Butterfield

    Mick Butterfield Well-Known Member

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    Hi All,

    I have come into a situation where I may be doing a development (as the chief financier) with the builder who owns the land. I have known this person for several yars in a professional sense and am confient that we will be able to maintain a good relationship throughout the process. Neither of us can do the development independent of each other and it looks to be a nice little development for me to cut my PD teeth on.

    Question is where do I start in relation to mapping out the best structuring for this scenario and what costs would you anticipate for the structuring of the JV?

    Cheers in advance,
    Mick.
     
  2. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    1.Accountant
    2. Property Lawyer
    3. A few k
     
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  3. Mick Butterfield

    Mick Butterfield Well-Known Member

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    Thank you.
     
  4. Blacky

    Blacky Well-Known Member

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    Ive seen this before and it can get quite complicated when the land is already owned by one of the JV particpants.
    I would reccomend that you set up the JV entity/structure and then sell the property into that entity. It will cost a few K in stamp duty, but makes the enitire ownership far cleaner.

    Common entities are a Pty Ltd, or unit trust.
    However, there are many itirations.

    Blacky
     
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  5. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    I have a sample JV contract I can send you. Just email me for it.
     
  6. Blacky

    Blacky Well-Known Member

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    The JV contract is one peice of it.
    Be sure you document decision making process, roles, responcibilities, entry/exit options and strategies etc etc etc.

    Saves arguments later.

    Blacky
     
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  7. Mick Butterfield

    Mick Butterfield Well-Known Member

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    Thank you @Blacky. I was looking into that and feel that it may be the best way to progress. We may also be eligible for a grant (NHG in NSW) which will all but negate the stamp duty. Will clarify this with the solicitor.
     
  8. Mick Butterfield

    Mick Butterfield Well-Known Member

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    We have spoken on this already and are in principal on the same page. Should be nice and clean.
     
  9. Mick Butterfield

    Mick Butterfield Well-Known Member

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    Thanks @Colin Rice will do.
     
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  10. Blacky

    Blacky Well-Known Member

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    thats good - just need to document it then ;)
     
  11. Mick Butterfield

    Mick Butterfield Well-Known Member

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    Will do. If it's not in writing it's worth nothing!
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Work out what you want. Will you be just lending money?

    Transferring title will be costly in terms of stamp duty and CGT for the vendor. It may be worth it, or it may be better to keep as is and just have agreements in place.

    You can have another entity do the development and divert profits to that.

    Legal advice and documentation could be around $10k to $20k mark depending how complex it is.

    This is something I wouldn't advice on myself because of the complexity.
     
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  13. Mick Butterfield

    Mick Butterfield Well-Known Member

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    Apart from having some input in the finishes and the sales process (through our agency) at the end I will primarily be the financier. He will be in charge of managing the building side of operations.

    Thank you for the advice on the legal side of things. I will be sure to have a firm path prior to proceeding.
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    In that case why not just lend money and charge an interest rate - easier to manage and you can take a mortgage as security.
     
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  15. Mick Butterfield

    Mick Butterfield Well-Known Member

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    Can I do this if I am required to get a loan for some of the funds?
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sure.

    But if you need to use that property as security and your are not an owner it might be difficult.

    How big is the development?
     
  17. Mick Butterfield

    Mick Butterfield Well-Known Member

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    It will be used as security. Total development cost is about $800K (land and duplex) end val 500-550K each.
     
  18. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    That will be difficult if you are not an owner or part of a company that owns. Sounds like a residential deal.

    if commercial these sorts of things can be easier.
     
  19. Mick Butterfield

    Mick Butterfield Well-Known Member

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    I
    I think we were looking at resi financing after speaking with my broker. Can that be funded through a jv without being on title?
     
  20. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    If you're not on the title in any way, I can't see lenders being very happy with it - they'll want to know how you benefit, and if you're not on the title, legally you don't benefit at all. It's a very risky way to go about it - I'd be inclined to pay the stamp duty and get yourself on the title, even in a 50/50 capacity.