For landowners, investors and developers
Joint Venture Finance for Property Development
Sviatoslav JerdetchiiCEO & Founder of Craftex. Updated , 6 min read
The short answer
Joint venture finance pays for a property development joint venture: partners put in land or equity, and a lender often adds senior debt. The lender is repaid first, then each partner gets its capital back, and any profit left is shared on written terms.
- Equity is paid last and shares in profit and loss. Senior debt is paid first and earns interest, not profit.
- Many joint ventures borrow through a company set up for one scheme. Lenders generally focus on who controls it, the security and the exit.
- Who funds the land, the planning, the build and any overrun should be written into the heads of terms.
- We do not lend, arrange or advise on finance. Take independent financial, legal and tax advice.
Joint venture finance is the money behind a property development joint venture. Partners put in land, cash or work as equity, and a lender often adds senior debt secured on the site.
This guide covers equity and debt, how lenders read a joint venture company, who funds what and how profit is paid out. It is general information, not financial advice.
We develop and build. We join each property joint venture as the partner who prices and builds the scheme, with our own construction team and the terms in writing.
Own a site and weighing up a partner? Get a free site review.
Joint venture finance: JV equity vs senior debt
Every joint venture is paid for by two kinds of money. Equity is what the partners put in and own. Debt is what a lender puts in and expects back, with interest.
The difference decides who is paid first, who shares the profit and who carries a loss.
| Point | JV equity | Senior debt |
|---|---|---|
| Who provides it | The partners: landowner, developer, investors | A bank or specialist lender |
| What it can be | Land at an agreed value, cash, or work | Cash, released in stages |
| Paid back | Last, after all debt | First, from a sale or refinance |
| What it earns | A share of the profit | Interest and fees, no profit share |
| If the scheme loses money | Takes the loss first | Protected by security over the site |
| How control works | Votes and reserved matters in the JV agreement | Loan conditions and checks before each drawdown |
Senior debt usually funds the build in stages, against work done. A monitoring surveyor checks cost and progress for the lender before each release.
Between the two sit other layers, such as mezzanine debt and preferred equity. Each is repaid in a set order. Our guide to development finance explained sets out the full capital stack.
How lenders view a JV SPV
Many joint ventures borrow through a special purpose vehicle (SPV): a company set up for one scheme. The partners own its shares, and the land and loan sit inside it.
GOV.UK says a limited company "is legally separate from the people who own it". Its owners are liable only up to their investment. That protects the partners, and it is why lenders look past the company to the people behind it.
Lenders generally focus on these points:
- Ownership and control. Who owns the shares, who decides day to day, and which decisions need every partner.
- Security. A charge over the site, so where the land sits matters before the loan is discussed.
- Guarantees. A new company has no history, so lenders may ask the partners for guarantees.
- The JV agreement. Funding calls, default, deadlock, and what happens if a partner cannot pay.
- The team. The track record of the developer and the contractor, and the build contract.
- The numbers and the exit. The appraisal, the cost plan, the programme and who will buy or rent.
Where we are the partner, point 5 is our own construction team and a build contract priced inside the joint venture.
Each lender sets its own terms. Ask every lender what it needs from the SPV and the partners before heads of terms are signed.
Who funds what: land, equity and debt
Write down who pays for each stage before anyone spends a pound.
| Stage | Usually funded by | Agree in writing |
|---|---|---|
| Land or building | The landowner, at an agreed value, or a partner who buys it | The value, when title moves, whether it counts as capital |
| Feasibility, design and planning | One partner's cash, often the development partner | Who carries the cost if consent is refused |
| Build cost | Senior debt plus the partners' equity | Whether equity goes in before the first drawdown |
| Interest and lender fees | Rolled into the loan or paid from equity | Who pays if the programme slips |
| Cost overruns | Funding calls on the partners | Deadlines, default and dilution |
| Sales and letting costs | The sale proceeds | Agents, legal fees and the exit date |
Ask each lender whether the equity must go in before its first drawdown. The answer changes how much cash the partners need, and when.
Where we join a scheme, the route depends on its stage. We co-invest alongside you, take all of the risk, or work for a percentage or a fee. Where agreed, we fund and run the planning application. Read how a property development joint venture works for each stage in order.
We hired Craftex for a commercial ground floor fit-out with 2 flats above. There were some minor co-ordination hiccups with third-party suppliers but the team kept it moving. Finish quality was strong. Kitchens and doors look great. I have already asked them for a quote on the next project.
The profit waterfall in plain words
The waterfall is the order in which money leaves the scheme when it sells or refinances. Each level is paid in full before the next receives anything.
This is an illustration only, not an offer or a typical split:
- Costs of sale. Agents and legal fees on each sale or letting.
- Senior debt. The loan, its interest and its fees.
- Other lenders. Any mezzanine or other debt, in the order agreed between them.
- Capital back. Each partner's cash, and the land at its agreed value if the agreement counts it as capital.
- Preferred return. Only where agreed: a return paid to an investor on its capital before the split.
- The split. What is left, shared in the agreed proportions, sometimes with a larger share for the developer above a hurdle.
The order works in reverse for a loss. If the scheme makes less than planned, the levels at the bottom are paid less, or not at all.
Settle the details before you sign. Is the land valued as it stands or with planning? Do fees paid to a partner come before profit? What happens on an early sale? Our guide to joint venture agreement key terms covers the waterfall clause in full.
We never publish a standard split. Our build contract is priced separately inside the joint venture, so the build cost and the profit share stay visible. On your site, the split is agreed with you in writing before anything is signed.
When to borrow instead of a joint venture
A joint venture is not the only route. If you can fund the equity and run the scheme, borrowing lets you keep the whole profit. You also keep the whole risk.
| Your position | Joint venture | Borrowing |
|---|---|---|
| Profit | Shared in agreed proportions | Yours, after the lender is repaid |
| Risk | Shared, as the agreement sets out | Yours, and lenders may ask for personal guarantees |
| Cash you need | Land or a smaller share of equity | All the equity the lender asks for |
| Experience you need | The partner brings it | Yours, which lenders generally focus on |
| Control | Shared through reserved matters | Yours, within the loan conditions |
Would you rather keep the whole site and borrow? See our page on property development finance. We introduce developers to the lenders we work with on our own projects. We do not lend, arrange loans or give financial advice.
Check any lender or broker on the FCA's Financial Services Register. It is a public record of authorised firms and individuals. If a loan to an individual is secured on land that includes their home, consumer mortgage rules can apply.
Offered a share of a scheme with a promised return? Read our guide to property development investment scams first.
Weighing up a partner or a loan for your own site? Get a free site review, and a director tells you whether a joint venture makes sense.
Before you agree how a joint venture is funded
- The land value is agreed in writing, and whether it counts as capital
- Who pays for planning, and who carries the cost if consent is refused
- The order of equity and debt is confirmed with each lender
- Funding calls, default and dilution are written into the agreement
- The waterfall is written as a list, in order, with no gaps
- Each partner has taken independent financial, legal and tax advice
