Investing with family

This is something we’ve often considered but always ruled out, due to the concern that family relations could be affected in a bad way. I think that with property investment there is a real likelihood of differing opinions and this could cause some tension between family members.

Just my opinion – saying that, I’m sure there are loads of people out there who have success stories of investing with families.[biggrin]

Hello drec0007 / Pippa,

This sounds very very familar [hmmm]……could you be a little bit more specific….

1. What exactly is your brother proposing ??
2. What type of ownership arrangement is being considered ??
3. What type of property is being considered ??
4. What can you bring to the table in terms of strengths…..surely you have something to offer otherwise why would he ask you to join him ??
5. When you say “look out for”….do you mean bad things your brother can do to you and your husband or do you mean good things to look out for to enhance any arrangement you may make.
6. Surely if you are considering a normal house or flat type IP…..you and your husband have at least some clue what you are buying and not completely in the dark.

The more detail you provide, the more pertinent the answers will be.

Hi Pippa,

My brother and sister and I (as well as 2 partners) have just started in a family based property venture. We had many concerns when starting this up as to how it would impact on our family life. Some concerns that we had were:

1. Being able to seperate family and business.
2. Issues with family members not involved.
3. What happens in the event of break-up (between family member and their partner)
4. What happens if there is a falling out.
etc etc

I don’t see that there is any issue in doing this but it is important that before you start anything that you look at the situation from the worst perspective to see how people respond and also that you set out expectations beforehand.

Before we started, we invested a month or so in generating a business plan, this involved all of us putting in time and effort in researching projects/suburbs, financial budgets and planning, mission statements, etc etc etc all up about an 80 page document. This set out group expectations, roles within the group, agreements between all members, but more importantly it was a mini-project that we all took part in, this quickly highlighted any issues that we had working together and also how we could avoid or deal with these issues. This was good within itself as it allowed us to see how we’d work as a team before there was any major money invested. We all worked really well together and we quickly found where our strenghts and weaknesses were and also allowed us to find the best way to work going ahead. Project 1 is underway as we speak, a subdivision and build project that should complete around December, so far so good.

So to summarise, I think that family projects can work as long as you:

1. Set expectations early, PI can be a major time and money investment. Make sure that everyone is aware of what is required from them BEFORE you start. Sacrifices are required, as long as you put it in writing and people sign up for it then you’re a step ahead.

2. Undertake a small project first, even if its a simple business planning project. Even something as small as asking people to bring 1-5 potential projects to the table each week/fortnight, you’ll quickly see who’s dedicated to the cause and who isn’t.

3. Put something in writing, having a business plan, mission statement, set of goals, whatever it is, as long as everyone in the group has a clear cut idea of what they are trying to achieve and everyone shares that same goal/ideal, you’re a step ahead.

4. Play to peoples strengths, take advantage of the different skill sets that you have in your family. This will be the most time effecive way of achieving each step/goal, and it’ll also help people becoming frustrated when they’re trying to do something that they’re not good at. While its good to challenge people and expand they’re skill sets, you’ve still got to be as productive as possible.

5. Work out how you’re going to structure things financially, finances can split people really quickly. Whether you set the whole thing up as a trust, company, etc, deciding how people are going to put cash in and take cash out is a big one. Speak to an accountant as to how to structure you’re venture, but as long as you all understand early on how to divy up your funds both going in and coming out. Also, decide on your investment approach, if you’re approach is long term holding of property, make sure that people aren’t expecting a return on their money immediately.

6. Set aside specific family (NO BUSINESS) time, being able to enjoy your family without conversations drifting to the business is important. Esepecially if you’ve got family members who aren’t part of it. No one wants to feel excluded, so don’t spend your time at the family BBQ discussing only business, take time to enjoy your family’s company and have set times for talking business.

Those are probably the key points that I’ve picked up on thus far, working and succeeding with family can be extremely rewarding and fun, but it takes a lot of work and planning to ensure that it does work. I think that you have to think in worst possible consequences before you start and see how people react, it can often be an uncomfortable discussion to have, but better to do it now than in mitigation or court.

Best of luck!!!

Dave.