Hi
Could anyone give me some advice on investing with a family member? My brother and I are looking at dipping our toes into the market by building a new house with the intention to rent and want to set it up fairly for all from the start.
We feel it would be wise, even despite our close relationship, that everything should be set up legally to protect each party. How does this work, do you have a fund that all the expenses and incomes will go in and out of eg. rent, management fees, etc?
I would be particularly interested to hear advice from people that have done it successfully.
Thanks
P_hewsonI always find these things work OK so long as neither of you is living in the house. For example it is usually a terrible idea to buy a house together and live in it. Buying a house together to rent out isn’t so bad, because the fact is you can simply sell it if you have too and probably won’t loose any considerable money.
If you have to go as legally as fund I think you are going far to far. There should be enough trust they you can both put your names on the loan and be joint owners and simply write your own agreement and sign it (ie that you agree to pay for the house and the expected costs for at least 4 years before selling it, otherwise you will also pay any monies lost upon being forced to sell the house to the other party).
Get everything decided before you start looking for a property to buy.
What is the goal and time frame for investing?
How are you going to fund the investment ongoing, expenses, repayments and so on.
Seems simple, cover the basics and set the ground rules now.
Opportunity in everythinng
Hi,
Depends on what your investment goals are, is this just a one of property that you and your brother will go halves in or is it a business of buying and holding?
If you are buying other properties together will you do the same or renovating and selling?
Need to be clear on your goals and also need to make sure you are both thinking similar way.
If I was in your position I would have that conversation with my brother to decide the direction you will both ake and depending on the outcome of the conversation go see a savvy accountant to set this all up properly.
Good luck
Jenny1
Thanks guys,
We have discussed our goals at length and we both agree that we want to start with one new property, that we will contribute only some work to ourselves eg. tiling, landscaping etc. If this first venture works well then we will expand to possibly up to 5 properties within a few years.
We are both sure of our goals the only concern we both have is if we have the ability to seek out the right properties and sustain our portfolio. I don’t think either of us have any concerns about the financial obligations to each other but because there are spouses involved we want it to be operated like a business.
p_hewson
go to http://www.lawcentral.com.au and look through the documents there. There is one called something like ‘agreement to jointly purchase property’ which may be what you are after.
Terryw
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P_hewson,
I’m actually doing this now, there are some important things to consider:
* Goals – Ensure that you are both aligned as to what your goals are, if not, then you’re not going to want to do the same thing and make the same decisions.
* Expectations – Set expectations early, be honest about what you expect from each other. You don’t want to get PO’d because you’re out there trawling the market every weekend while your brothers golfing.
* Structure – How are you going to invest , are you going to do it as individuals, partnership, trust, etc.
What I’d suggest is that you write a business plan, this document will cover all of the above and more. Even the process of preparing a business plan is a mini project in itself, this will give you an opportunity to see how you’ll work together early.
My brother and I work very well together, but this will differ on a case by case basis. I know family businesses that have failed and split up families, but also family businesses that have been very successful.
I think its important that you do the ground work to see how you work together, and also be honest and up front before starting.
Good luck.
D.
Thanks D,
Great to hear that your situation is working well. I have been hearing a few wispers about unit trusts, maybe that is the way things should be set up? Has anyone had any experiences with these, is this the answer to setting up a partnership?
Who’s name is on the house, would it be both? Would love to hear your experiences.
p_hewson
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