If you’re looking to own a real estate property, you should know that there are ways to buy a property without having to spend a truckload of money. Considering that real estate is more expensive now than a year ago, it would be wise to find additional ways to own property. Also, it is helpful to minimize the risks associated with owning property.
A joint venture is when you partner with someone else to develop a property for commercial purposes. For example, you want to use the plot of land two blocks from your house as an office building, but you don’t have the capital to construct a facility there. What you can do is to seek out a company or individual with the means to fund your project.
When both of you draw up the contract for your partnership, you identify yourself as the operating member of the project while the other party funding your project will be categorized as the capital member. You’ll both be liable for the profits and losses of your project. So, even if you weren’t able to contribute financially to this project, the fact that you’re a partner means you’ll still get a substantial percentage of the profits if your joint venture becomes successful.
Another way to own property is through undivided interest. This enables you to spread the cost of owning a property by having other people pitch in. Keep in mind that the undivided interest plan could be used to purchase real estate for commercial purposes, but it’s more frequently used for property ownership.
One of the categories of property ownership in undivided interest is tenant-in-common or TIC real estate. When you’re operating under this provision, it means that you and other individuals own a share of a particular property. You all get to pitch in to purchase and develop that, like in joint venture projects.
But the difference here is that is no sole individual involved in the project is allowed to use the property exclusively. On top of that, you can’t engage in any activity that can deter the other parties’ interest in the property.
Advantages of one over the other
Both options are good for individuals who are looking to purchase a property for commercial purposes. Joint venture agreements are often used to buy a plot of land and develop it into a commercial building like an office, factory, or department store. TIC agreements are also being used these days to develop real estate for commercial purposes.
As always, consult your legal advisor or attorney before entering into any legal contracts.