Investing in rent-to-own properties can be a smart way to build wealth and earn passive income. One option is to enter into a joint venture partnership with a rent-to-own company.
What is a Joint Venture Partnership?
A joint venture partnership is a legally binding agreement. Therefore, it’s important to have a clear understanding of the terms of the partnership, including the percentage of profits, management fee, and responsibilities of each party. As a real estate investor, it’s also important to do your due diligence and research the rent-to-own company to ensure they have a good reputation and track record of successful partnerships.
How Does a Joint Venture Partnership with a Rent-to-Own Company Work?
- The private investor provides the capital to purchase a rent-to-own property (usually a single-family home or small multi-unit building) and goes on title
- The rent-to-own company finds a qualified tenant and manages all aspects of the tenant screening, lease agreement, and property management.
- In return for their investment, the private investor receives a percentage of the rental income and shares in the appreciation of the property’s value when the tenant exercises the option to purchase.
- The rent-to-own company receives a percentage of the rental income.
- Both parties split the profits when the tenant purchases the property. This type of partnership allows the private investor to earn passive income and build wealth over time, while the rent-to-own company can increase their portfolio of properties.
Examples of Joint Venture Partnerships:
1. Rent-to-Own Company & Private Investor Helping a Family
A rent-to-own company, such as JAAG Properties, and a private investor form a joint venture partnership to provide a hassle-free home ownership solution for families who may not qualify for traditional financing. The rent-to-own company specializes in helping clients secure properties that are suitable for rent-to-own arrangements, while the private investor provides the capital and purchases the properties.
The joint venture partnership allows the rent-to-own company to expand their business and provide more affordable housing options to families, while the private investor can earn a steady return on their investment through real estate.
The rent-to-own company works with the families to find properties that fit their needs and preferences, and helps them navigate the rent-to-own process, including setting up a structured rent-to-own agreement that allows the clients/individuals to gradually build up a down payment while they are renting the property.
The private investor, in this partnership, sees it as a way of giving back to the community (Impact Investing) by providing opportunities for families to achieve their dream of homeownership.
As the partnership progresses, the rent-to-own company works with the families to qualify for traditional financing and eventually purchase the property.
2. Rent-to-Own Company & Private Investor
A rent-to-own company and a private investor decide to form a joint venture partnership in order to purchase properties. The rent-to-own company brings their expertise in managing and maintaining rental properties, while the private investor provides the capital and purchases the properties.
Under the terms of the joint venture agreement, the rent-to-own company will handle the day-to-day operations of the properties, including finding and screening tenants, collecting rent, and performing inspections. The private investor will provide the funds to purchase and renovate the properties, and will receive a percentage of the rental income and appreciation of the properties in return.
The partnership structure can be different case to case and can be adjusted as per the agreement between the parties involved. The exact terms of the partnership will be outlined in a joint venture agreement, which will be legally binding on both parties.
Invest in Real Estate with JAAG Properties
Want to learn more about rent-to-own property investing? JAAG Properties is here to help you navigate the joint venture partnership process.
