Hello everyone,
Im looking at investing with 2 guys from work, we all have above average salaries and we have all recently purchased a property to reside, but are looking to combine the surplus from our wages and purchase property together and are seeking a lot of advise about best practises in this situation.
We would rather not use our PPOR for the investments but would rather contribute cash into a saving account and use that as a deposit on our first IPWhat is the best way to set this up?
A business/trust/Joint Venture?Thanks
Hi Tricky, welcome. If you do a search on this topic it has been discussed at length. However while I'm here I can give you my opinion
Obviously the 3 of you need to see an accountant and solicitor to discuss the most appropriate arrangements.
A few questions that you certainly don't have to answer here:
1. If you have above average incomes why do you want to invest with others? Do you want to go large with a commercial property?
2 You would rather not use your PPOR. This may prove problematic unless you have an enormous cash reserve. One of the many MB's on the forum can fill in the blanks here.
3. What is your exit strategy when one wants to bail / sell / marries/ divorces or dies?
I know people who invest with friends and it seems OK for them but not for me. Too many details…
Good luck.Thanks for the reply Lalibella,
We are looking to expand quickly and with our current work situation , we are on a fly in fly out roster so there is always someone on break that can do research, and this will speed up the process compared if we were to do it individually, we have an exit stratergy of 9 properties within 3 years and when this is achieved we will evaluate the total and decide whether we sell all nine and divide the profits or if we divide the propertys up, 3 each. From there we can proceed individually in our investment endeavors
As for the set up we have each have enough cash saved, that combined would enable us to purchase an IP without using the equity in our homes.
Hi tricky
if you are planning to divide upu the properties after a certain time I would suggest that you get some sound financial advice with regards to payment of capital gains because even though you may all jointly share the properties if there is a transfer of ownership you may face Capital gains. perhaps one of the more experienced investors or Mortgage brokers could confirm or clarify this.
cheers
Sonya
Hi,
Have you looked into setting up a corporation. Should anything happen to any one of you(i.e. Death, Marriage, or Divorce) you can set up a clause in the bylaws that gives the other two members first option on the exiting person’s shares. I would have to defer to a financial expert though.
We have come across an oppurtunity to secure a tenant on a 5 year lease, if we purchase a property in a specifc area which is worth just under a million, the purchase of the property would result in it being posistive geared even with a P&I loan. If the growth in the area is not predicited to rise significantly is it worth trying to "pump the cash into it" the IP or should we still be aiming at getting a interest only loan and trying to right off the tax?
Tricky
Firstly welcome to the forum and I hope you enjoy your time with us.
Reading your first couple of posts i think you probably need some specialised advice in regards to financing the deals as i think you are all getting confused on the best structure and the way to finance the deals.
Buying in a Company name as Trustee for a Discretionary Family Trust maybe practically be the way to go however funding the deal may prove slightly harder. Many lenders will treat you with a degree of suspicion and therefore close nuturing of the deal thru the Credit process will be essential.
Richard Taylor | Australia's leading private lender
Hi Tricky,
You say you want nine properties in 3 years, have you developed a strategy to achieve this ie a business plan, as investing should be seen as a business. Are you looking for rental returns or capital growth?The first thing I would do would be to sit down with someone who could help you develop this strategy and then if still thinking of doing it in a group then you definitely need to speak to a solicitor to determine the structure and then an accountant to determine your financial and tax implications.
Happy investing
Hi,
I agree with other posts about needing the preliminaries sorted.
That said, you have a goal and if you lack the funds it is smart to invest with others. Make sure you have each role defined though, as if you are all doing the same thing then it will cause arguments.
Open communication among the partners is the most important requirement. Common goals and expectations are also critical. For example, be careful if one party contributes more time or money than others. This will be acceptable in the short term but will cause tension in the long term.
As for a structure, unless you are related a family trust will be out. Therefore, alternatives to explore are:
a) A unit trust (where the units are owned by the three parties)
b) A partnership of family trusts (each party has their own family trust)As has been said, best to see an accountant to discuss your specific needs and what fits best.
All the best,
– Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
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