Hi again [
]My friend and I are going to form an investment group. Theres only two of us but between us we have will increase our borrowning power as we have 2 incomes and each are home owners (still paying them off but have about $200 – $250k equity. Can anyone advise me what steps we need to take. We are thinking of forming a company as we want to keep the expences seperate just to make it simpler to manage. As we are both newbies to this we don’t know what type of company would give us the greatest benefits.
Has any one had experience with joint investments and if so what advice to you have?
Thanking you
Ms ElvisHi Ms Elvis,
There are some helpful posts in the last few days on buying property jointly with someone other than your spouse or partner, particularly on the pitfalls of doing so. One of the most important things to do is to sit down with your friend and clarify exactly what each of you want to achieve, level of commitment, etc. I’ve tried to work out “joint ventures” with my friends in the past, but we realised that although we were all investing in property, we had very different goals and ideas on how to go about doing it. I wasn’t comfortable with what they wanted to do (subdivisions), since I had a different plan (cash-flow positive properties). And the best thing I did for our friendship was not to buy a property together with them.
As far as structures are concerned, there is a whole range of different structures you could use, each with good and bad bits. It really depends on your individual financial circumstances and goals. For example, you could simply buy as tenants in common with the title in both your names, which is essentially a partnership, but you need to clarify what each partner is allowed to do and what happens at the end of the partnership; you could buy through a company, but you won’t be able to personally have access to any tax deductions relating to the property, and it’s not as easy getting money out; you could set up a trust structure, which allows you to have access to deductions, but it’s a bit more complicated in terms of accounting.
In terms of setting up a bigger “group”, just remember that, while you’re free to get into business arrangements with people you know, you will start getting in grey, and possibly illegal, areas if you advertise (whether in the paper or by word of mouth) to the public to join in.
It may be worthwhile paying the money and getting advice from a decent accountant.
Cheers
MThanks M for you reply.
As for having different goals I totally agree with you. I totally trust this person and I wouldn’t go into partnership with anyone with different goals from my own. Luckily in my situation this is not a problem as we are agreed on that point and will have a legal contract to avoid future problems (should they arise) before we sign for a loan. We are going to do this just as 2 and not anymore so that eliminates the bigger group scenario.
My main concern is to find out what the best way to do this so we can both benifit finacially. If anyone has undergone this type of arrangement I’d love to hear from you and hear any advise you have to offer.
Cheers
Ms Elvis []Hi Again
If anyone has done joint property ventures i’d like to hear some advice on what were some of the do’s and don’ts. Obviously setting up as a company may not be the best idea but i’m concerned it will be messy as far as the accounting side. What other options are there? Any advice is appreciated.
Hi Ms Elvis,
I have done one joint venture for an IP and it was pretty easy. Both partners signed a JV contract which had all the details about how it would be run, how the finances would be shared, and what would happen if things went south. It is a legal document and enforceable.
The good thing is that you can set it up to say exactly what you want it to; the partners just have to agree on what the parameters are and have a solicitor draw it up. You can, of course, just agree on a handshake but personally I wouldn’t recommend it as what you thought would happen may not be what the other person thought would happen when a situation arises (like splitting the profits or sharing the costs, or something going not to plan).
Probably the best place to start is to talk to a solicitor and find out what they will charge to draw up a contract.
Good luck! Dianne
“Make a decision, take the risk, pay the price, or reap the rewards”
Hi Ms Elvis.
I think that the very least you would need will be a full Joint Venture agreement, legally signed and witnessed. I have seen examples on lawyer’s websites, but haven’t kept the URL’s…
Elysium-M mentioned a trust structure – research the kinds of Unit Trusts. One of these may give you and friend more flexibility.
Avoid a ‘partnership’.
Also depends on your aims: 1 IP or 30 IP’s?
What happens if your friend is more or less ambitious; or more or less risk-averse than you?
Research, research, take professional advice – your idea is worth pursuing!
TerryTerence McMahon
HomeWin
Financefailing this, you can always join a property club.
cheers
Thanks to all who replied. JV sounds pretty much what I had in mind. As a newbie to property investing I’m finding theres so much to learn. I would like to find out more about trusts just to learn about the tax benifits and whether or not it is the right thing for me. I suppose the best thing would be to talk to an accountant. On that note can anyone recommend a good accountant who deals with PIs.If anyone can recommend some good books that relate to this topic please let me know
Thanking you
Cheers
Ms Elvis
]
The topic ‘forming investment groups’ is closed to new replies.
