Myself and 3 friends are looking at buying an investment property and are looking for the best way to set it up. We would prefer to keep finances serperate and are unsure how to do this. Any tips would be appreciated.
I bought a +cf property with a friend 3 years ago.
The loan and the title (contract)of the property go into the four of your names. You get the conveyancer to make the four of you as ‘tenants in common’ which means you each get an equal share of 1/4 of the property and can pass that share on to a person of your choosing should you die god forbid.
Whereas with ‘joint tenants’ your share would be divided equally between the other three owners.
You can keep your finances separately, but the loan for the property will be in a bank account with all your names on it, so every month you will all have to deposit the money for the loan in equal amounts.You could buy the IPin a Hybrid Discretionary trust.
Eack of you getting a loan for the desired amount in your own names, then purchase units in the HDT for $1 each. Trust then buys IP and can split profits as per unit value.CATA
Asset Protection Specialist
[email protected]dont forget to get your lawyer to draw something up that states the agreement, what happens if any of you need to get out etc. how long the property will be kept, division of capital gains etc
It would be terrible to fall out with your friends over property, it doesnt matter how good friends you are, get it in writing every time!
This would also help if you decide not to go with the hybrid trust thing, because if you didnt do that, the loan would have to have all your names on it. How messy would that be if one of them didnt pay? the other three of you would be liable!Cata
Sounds good in theory, but it would probably be very hard to get a loan for something like that. It would be very messy.
Generally the loans will need to to be in the name each title holder. But what you could do is get 3 or 4 splits, with each split used exclusively by each partner. So each can pay as much or as little as they like. However each partner would be responisble for the whole debt. So if 3 of the 4 partners refused to keep paying, the 4th will have to pay etc.
Terryw
Discover Home Loans
Parramatta
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Steve
Why are you going into it with 3 friends. is it the high cost of the property? looking to share the risk?
You might have good intentions at the beginning, but will you still be friends afterwards (and it would be a shame to lose a friend over money). People’s circs change. You would have to have some legal agreement agreed upfront for exit strategies – and when you have this you have to be able to separate your thinking from business and friendship.
If it’s the cost and the shared risk issue, why not consider a low entry level property of about $120K in a 2-bedroom unit in a small complex in a regional centre that you can afford yourself. Body corp arrangements will in some respects spread your risk with other investors/owners without sharing ownership of your unit.
In my business (see http://www.888abundance.com), I have a boardgame product that allows rookies and experienced investors to roadtest their strategies in the Australian residential property market. One of the ‘teams” that played together in a workshop ended up being at loggerheads as they were confronted with making decisions. They learnt that they shouldn’t be in business together (not in investment property anyway).
If you’re going into it for friendship, there are less costly activities to go into to preserve the friendship and do things together.
If it’s for investment, you need to think about it purely from that angle, and leave the friends angle out of it – ie you go as business partners (the fact that they are friends is just a coincidence, but not necessary).
Gary[aacool]
Author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
Creator of “Property Millionaire – The Boardgame”
http://www.888abundance.com
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