Creative finance is at the heart of seizing unique investment opportunities, one such strategy is through Joint Ventures (JV). In these arrangements, the cash provider typically receives a share of equity in the deal and may also earn interest on their investment. This approach creates a win-win scenario for both parties, especially in larger, more complex deals that involve significant investments, higher risk, and the potential for greater profits.
For my first property purchase, I used a blend of bank financing and a joint venture. I acquired a three-bedroom, one-bathroom flat in South Johannesburg for R480,000. The seller, weary of being a landlord and frustrated with the traditional selling process, was ready to exit. To make the deal work, I needed the property to be cash-flow positive from the outset. At the time, the property was valued at around R700,000, but the seller only wanted her R500,000 investment back.
I negotiated a deal whereby we would enter into a joint venture, allowing me to bring the purchase price down to R480,000. The seller agreed to carry R180,000 of the purchase price while I used traditional bank financing to pay her R350,000 in cash. With the bank loan and other expenses, the deal yielded a positive cash flow of R800 per month. While modest, this set the foundation for long-term growth.
With R350,000 in equity, I could refinance the property, tax-free, and use the proceeds to reinvest in other projects. My first reinvestment generated a 20% return, half of which went to the seller—now a partner and cash provider. This is a true example of a win-win strategy.
