Funding your equity contribution to a property joint venture

Joint ventures let developers and investors take on projects none of them would tackle alone. One partner brings the site, another the build experience, a third the capital. The joint venture agreement sets out who puts in what, when, and how the profit is split.

Then the project does what projects do. Costs rise, the site needs a bigger deposit, a lender wants more equity before it will fund the build, or a stage runs late. The JV manager issues a cash call, and each participant has a fixed number of days to pay. If your money is tied up in other property, that call can put your share of the venture at risk. This page explains how to meet it with a short-term loan secured on completed property you already own.

What is a joint venture, and why do cash calls happen?

business.gov.au describes a joint venture as an agreement between two or more parties to work together on a specific task or project, temporary rather than an ongoing business. Each participant is responsible for the profits, losses and costs associated with it. The joint venture agreement is a legally binding document that may cover the structure, governance and obligations, financial contributions, the division of profits and losses, intellectual property, dispute resolution and how a party leaves or the venture ends.

Cash calls come from that “financial contributions” clause. Common triggers:

• an initial equity contribution to buy a site;
• a further contribution when a construction lender requires more equity;
• cost overruns or delays;
• holding costs such as land tax, interest and contributions while approvals are pending;
• a new opportunity the JV wants to pursue.

What does the ATO’s GST joint venture regime mean for contributions?

Not every JV is the same for tax. The ATO allows participants to form a GST joint venture under a written agreement for a specified purpose, with an operator who handles the venture’s GST administration and lodges activity statements on the participants’ behalf. Participants must be registered for GST and account on the same basis, and in a GST joint venture they share outputs according to an agreed ratio rather than sharing sale proceeds or profits. If participants plan to share proceeds from product sales, the ATO notes that a partnership or company structure may be needed instead.

This matters for your exit. Whether you receive completed lots, a share of profits or a return of capital determines how and when your loan is repaid. Ask your accountant how your JV is set up before you borrow.

What should you check in the JV agreement before you borrow?

Your loan’s exit depends on the agreement as much as on the project. Before you commit, have your solicitor confirm:

• The call mechanism. Who can issue a call, how much notice is required, and whether there’s a cap on total calls.
• Default consequences. What happens if you don’t pay: dilution, interest on a partner’s advance, a right for others to buy your interest, or loss of voting rights.
• Distribution order. Whether contributed capital is returned before profits are split, and whether later calls rank ahead of earlier capital. This sets when your money comes back.
• Restrictions on encumbering your interest. Some agreements limit what participants can do with their JV interest. Our loan is secured on your separate property, not your JV interest, but check there’s no clause that affects it.
• Reporting. Your right to cost reports and sales updates, which you’ll need to plan your exit.
• Exit and termination clauses. What happens if a partner wants out mid-project, and on what terms.

Bring these answers to your enquiry. A specialist can then match the loan’s term to the point when capital is realistically returned, rather than to the project’s most optimistic date.

How does funding a JV contribution work?

1. Read the call notice and the JV agreement. Amount, deadline, and what happens on default.
2. Choose the security. Completed property you own: an investment property, your premises, finished stock from another project, or your home.
3. Map your exit. Your expected distribution date from the project, a refinance, or a sale of the security property.
4. Enquire. Property details, what’s owing, the call amount and deadline, and the project timeline.
5. Receive terms and a Letter of Offer. Structure, amount, term, interest handling and fees.
6. Settle and pay the JV. Funds go to the JV’s nominated account or as the agreement directs.
7. Repay from your exit.

We lend against completed property. We don’t provide construction loans or progress draws for the JV project. The construction loan vs property-secured developer funding comparison explains how the two kinds of funding sit side by side.

Which structure suits a JV contribution?

Your security	Structure	Notes
Rental or premises with a bank loan	Second mortgage or caveat	Bank loan untouched; a caveat can later become a registered second mortgage
Debt-free completed property	Private first mortgage, 1 to 24 months	Strongest position; generally keener pricing
Property held in your company or trust	Mortgage by the entity, with guarantees	See company or trust-owned property
Two properties with partial equity	Security over both	Spreads the load

A second mortgage or caveat sits behind another lender and generally costs more than a first mortgage.

How does borrowing compare with other ways to meet a call?

Option	Upside	Downside
Private loan against your completed property	Meets the deadline; keeps your share	Short term; property secures it
Being diluted under the JV agreement	No borrowing	Your share of profit shrinks, sometimes on penalty terms
Borrowing from another JV partner	May be simple	Often on terms the agreement sets, which can be costly
Selling another property	No debt	Rarely fast enough for a 14–30 day call
Bank equity release	Lower cost if approved	Bank may be slow or reluctant for development purposes
Selling your JV interest	Exits the risk	Usually at a discount mid-project

Who does this suit?

It suits:

• developers and investors who are participants in a property JV and own completed property;
• partners facing a call with a short deadline and a default clause they want to avoid;
• participants whose capital will come back at project completion or settlement;
• business JVs, such as two firms jointly bidding for a contract, where a participant must contribute cash.

It doesn’t suit:

• participants without completed property to offer;
• JVs where the project’s completion or sales are uncertain and there’s no other exit;
• funding the construction itself, which is outside what we lend for.

When is borrowing for a cash call the wrong move?

• The project is in serious trouble. If the call is one of several and the project’s feasibility has collapsed, borrowing to keep your share may just add to your losses. Get independent advice on the project first.
• The JV agreement’s default terms are mild. If a missed call means only a modest dilution, compare that cost with the loan’s cost.
• There’s no exit except the project. If the project runs a year late, can you still repay? Keep a second exit, such as selling the security property.
• Your partners are borrowing on the same project at the same time. That’s fine in itself, but it’s a sign to check the project’s health closely.

If the cash call is because the build has gone over budget, also read our page on construction cost overruns, which looks at that specific problem.

What it costs (without the guesswork)

Pricing depends on each loan’s security, LVR, term and exit, and we aim for the sharpest price the circumstances allow. You’ll pay interest (prepaid, capitalised or monthly), an assessment fee that varies per loan and appears on the Letter of Offer, and legal, registration and discharge costs. There’s no formal valuation required, so your contribution isn’t held up by a report.

Illustrative example: a partner meets a cost-increase call

Illustrative: an investor holds a 40% share of a Perth townhouse JV run by a builder-developer. Construction costs rise and the construction lender requires more equity, so the JV calls $350k from the investor within 21 days. The investor owns a rental house worth about $1.1m with $280k owing. At an illustrative 65% LVR band the rental supports total secured debt of about $715k, leaving room of about $435k behind the bank.

Item	Amount
Second mortgage over the rental	$395,000
Less illustrative allowance for 12 months’ capitalised interest	$(33,000)
Less assessment fee, legal and registration costs	$(12,000)
Paid into the JV account by the deadline	$(350,000)

The project completes ten months later. The investor’s distribution from townhouse settlements repays the second mortgage, and the rental’s bank loan is never touched. The fallback was selling the rental. The figures are round and illustrative only.

Documents you’ll need

• The JV agreement and the cash call notice
• The project budget, cost report or lender’s equity requirement behind the call
• The project’s timeline to completion and settlement
• Title details and loan statements for your security property
• Company or trust details, if you participate through an entity
• Photo ID for every borrower, director, guarantor and security owner
• Evidence of any fallback exit

How fast can a contribution be funded?

With the file complete, loans up to $5m can be possible within 24–48 hours, and smaller sums against property can be possible the same day. If your contribution is your share of a site deposit, see site deposit funding. For the wider picture of how developers use completed property, see developer finance secured on property. If your equity is in a rental, read releasing equity from an investment property, and if the JV is a business rather than a development, business expansion funded by property may fit better. Western Australian participants can read about private lending in Perth.

Cash call on the clock? Send us the notice and your property details and a specialist will confirm what can be paid by the deadline.

Facing a JV cash call? See if you qualify

You can check without any credit enquiry being made, and your details stay with one direct lender. An experienced specialist reviews your JV and your security personally. fundU, our lending partner, assesses the property directly.

Tell us the call amount and deadline, your share in the venture, the project’s expected completion and every loan on the property you’re offering. Getting those facts right first time lets us give you an answer you can commit on. Start your enquiry.