Hi all
A friend and I would like to start a small syndicate for property investing. We both have a PPOR and one IP, so our experience is limited. We would like to have 4 or 5 people in the group to start with. As we see it, the advantages would be:
– Working as group gets more work done than as individuals
– Motivation is increased
– Pooling resources can allow us to acquire more properties quickly.
– It will help us to become more businesslike in our approach to investing.I would love to hear everyone’s 2 cents worth.
In particular, I would like suggestions regarding:
– what company/trust structure to use
– what agreements to make between parties at the outset
– any good books or resources on the topic
– what order to do things ie: start the company/trust first? Find a likely property first? Gather a team of solicitor, accountant, banker etc first?Thanks in advance for your thoughts.
dougiejgHe is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot
P.S.
I am not inviting anyone to join this group.
Thought I better make that clear.
Thanks[exhappy]He is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot
I have seen a few of these groups form over the years, and can’t remember one that has actually done anything. Doesn’t mean your’s won’t, but just be aware the more people you have the harder it is to agree. Then there is the fact that some will work harder than others, some will contribute more than others and some will resent this (and other things!).
You should probably use some sort of trust, but be wary of using all names in one hit. These may eat up serviceability quickly. It may be better to set up one trust per person and have it so that each person can be a beneficiary. Start with one at a time, maybe the person with the highest income for servicing.
go to http://www.lawcentral.com.au and have a look at their JV agreement for the joint purchase of property. You will need something like this drawn up from the beginning.
Hope this helps.
Terryw
Discover Home Loans
Parramatta
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Thanks Terry
That’s a great looking site. You may have just saved me some $ in legal fees for the future.
Your advice seems very sound. ThanksHe is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot
Originally posted by Dougiejg:Hi all
As we see it, the advantages would be:
– Working as group gets more work done than as individuals
– Motivation is increased
– Pooling resources can allow us to acquire more properties quickly.
– It will help us to become more businesslike in our approach to investing.What do you think the disadvantages might be?
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Dougie,
There is a guy called Chris Lang who puts together small syndicates to buy commercial properties, he has a free ebook on the subject on his web site http://www.gal.com.au.
Regards
AlistairMortgage Hunter
What do you think the disadvantages might be?I can see a risk of disagreement between members down the track.
This could damage friendships.
Always a risk of losing money, but that is in any investing.
Certainly there is a great deal for us to learn, and that is scary in a way, but not really a disadvantage.I am trying to think of the downside, but that is all I have so far. That is why I put this post up – to get a dose of reality check to mix with my enthusiasm. So please tell me the negatives that you can think of.
APerry
I tried that link, but it says page not available. Thanks for your email as well.He is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot
i noticed there is a full stop at the end. Try:
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Originally posted by Dougiejg:Mortgage Hunter
What do you think the disadvantages might be?I can see a risk of disagreement between members down the track.
This could damage friendships.
Always a risk of losing money, but that is in any investing.
Certainly there is a great deal for us to learn, and that is scary in a way, but not really a disadvantage.I am trying to think of the downside, but that is all I have so far. That is why I put this post up – to get a dose of reality check to mix with my enthusiasm. So please tell me the negatives that you can think of.
APerry
I tried that link, but it says page not available. Thanks for your email as well.He is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot
Glad you are looking at both sides.
One area, and it was mentioned, is borrowing. If you all go on the loan together then you will all be responsible for the whole debt individually. An example might help here.
If five people borrow $500K for an IP.
Then you go to buy a home. Your lender will see you as already having a $500K debt. Not your $100K share but the whole debt. If all your four mates are unemployed then you will have to meet the repayments.
Please see a cluey accountant and look at more sophisticated ownership vehilcles. Will be more expensive but if something goes wrong it may save you a fortune.
I am personally not a fan of syndicates. I think a club where you pooled info but bought individually would be safer for you all.
Sorry to be a wet blanket [blush2]
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by Mortgage Hunter:Originally posted by Dougiejg:Mortgage Hunter
What do you think the disadvantages might be?I can see a risk of disagreement between members down the track.
This could damage friendships.
Always a risk of losing money, but that is in any investing.
Certainly there is a great deal for us to learn, and that is scary in a way, but not really a disadvantage.I am trying to think of the downside, but that is all I have so far. That is why I put this post up – to get a dose of reality check to mix with my enthusiasm. So please tell me the negatives that you can think of.
APerry
I tried that link, but it says page not available. Thanks for your email as well.He is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot
Glad you are looking at both sides.
One area, and it was mentioned, is borrowing. If you all go on the loan together then you will all be responsible for the whole debt individually. An example might help here.
If five people borrow $500K for an IP.
Then you go to buy a home. Your lender will see you as already having a $500K debt. Not your $100K share but the whole debt. If all your four mates are unemployed then you will have to meet the repayments.
Please see a cluey accountant and look at more sophisticated ownership vehilcles. Will be more expensive but if something goes wrong it may save you a fortune.
I am personally not a fan of syndicates. I think a club where you pooled info but bought individually would be safer for you all.
Sorry to be a wet blanket [blush2]
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
And to make matters worse, if one of those five goes for a loan later on, one another property in just their name, the new lender will assess them on only their share of rental income for the syndicate property. ie total debt, but only 1/5 of the income.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
One area, and it was mentioned, is borrowing. If you all go on the loan together then you will all be responsible for the whole debt individually.And to make matters worse, if one of those five goes for a loan later on, one another property in just their name, the new lender will assess them on only their share of rental income for the syndicate property. ie total debt, but only 1/5 of the income.These problems can be overcome by choosing appropriate properties and using a commercial lender who will lend on a non recourse basis, ie with no guarrentees.
Regards
Alistairi noticed there is a full stop at the end. Try:Thanks Terry and APerry I have subscribed to that site and got some of the aritcles. Looks good.
Glad you are looking at both sides.One area, and it was mentioned, is borrowing. If you all go on the loan together then you will all be responsible for the whole debt individually. An example might help here.
If five people borrow $500K for an IP.
Then you go to buy a home. Your lender will see you as already having a $500K debt. Not your $100K share but the whole debt. If all your four mates are unemployed then you will have to meet the repayments.
Please see a cluey accountant and look at more sophisticated ownership vehilcles. Will be more expensive but if something goes wrong it may save you a fortune.
I am personally not a fan of syndicates. I think a club where you pooled info but bought individually would be safer for you all.
Sorry to be a wet blanket
Not a wet blanket at all. As I said, that’s why I did this post. I have asked a good accountant who is doing some research and getting back to me. We are also asking a business advisor who is into property and good with structuring for his ideas.
At this point it looks like some sort of a Trust – perhaps discretionary, or unit – will be the way to go. But still early days in the research. Perhaps also in combination with one or more companies.These problems can be overcome by choosing appropriate properties and using a commercial lender who will lend on a non recourse basis, ie with no guarrenteesThis is what we are hoping, and this is in fact the very reason we thought of starting a syndicate/company/whatever it ends up being called. We would hope to approach a lender with the details of a well researched property presented as a business proposal, and have the property as the only security for the loan – aside perhaps from some cash in the bank of the trust/company.
I guess time will tell if this hope becomes anything more.Thanks everyone. Keep it coming.
He is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot
Hi All, This is clearly a very old thread. But for what its worth I thought I would add my comments. I've set up my own syndicate and helped a number of people set up similar syndicates over the last few years. The structure I've used is a Syndicate Participation Agreement which as far as I'm concerned is a much better structure for multiple parties to invest in one or more properties than any sort of trust. <moderator: delete advertising>
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