Considered Investing with friends in Property?

by Mike on June 14, 2013

Property investment as friends

Australia isn’t alone with regards to problems with pricing, lending issues, availability and costs on property investment to the point where obtaining your own property to live in or as an investment has almost gone past the reach of most young families and couples. Having spent around four weeks doing the “Check out property” with a family member and being the “hard negotiator” for her I was pondering the state of my finances and investments and being somewhat jealous of her new home got me into thinking about doing more of this property investment in the future.

(Note I dont pretend to be a bad ass negotiator but I ask lots of questions and pay attention to detail which can go a long way)

Considered Family and Friends as Investment Partners Investment Partners

Unlike business there is far less active involvement when you go into property investment as friends or family but the financial commitment (and potential for reward) is the same. The difference for close family and friends is the blood tie or mutual concern / cooperation to improve your personal finances in the best way possible. This common ground is something most people overlook when thinking about property investment and something you may not see in a business or group investment environment. Everyone’s agendas here can be different and its more of a cooperation until it becomes every man for himself situation. Risk is also something that is reduced in this situation. Instead of one couple being accountable it can be spread so if there is negative result for the investment your out of pocket or losses are reduced.

Sure the loss is spread amongst friends /family but dont forget with an investment strategy like this you can invest in multiple properties so all your eggs aren’t in one basket!

Something I notice (and hold in high regard) here in Australia is the family effort of some cultural minorities. The extended family is all involved and participating in the financing and creation of a property portfolio so rather than leveraging just one or two salaries you can leverage the whole family. This kind of leverage can supercharge the borrowing and repayment along with building a substantial property portfolio if you have a large family.

 

Property InvestmentPut it all down on paper

Investing with family or good friends can be full of trouble for the long term. If personal financial goals change or hardship develops some of the investment partners may be unable to meet their commitments and as a group the banks or mortgage firms will generally hold you all accountable. Making sure everyone understands their commitment can be as easy as setting it all down,. Try these ideas;

  • Put all commitments down on paper so everyone knows their liability long and short term.
  • On paper list the goals of this property investment and what each party hopes to achieve. Pay attention if anyone has different short medium or long term goals as this could be your trouble down the road
  • List the offering or investment of every individual so its clear to the whole party or group their role and entitlement. Here you can also list if any individuals are taking on additional responsibility for this property investment.
  • Select and note a list of targets that would suit the group as a collective target

Work to the individual and collective strengths of the investment partners. Some people are probably much better negotiators and others are great researchers and investigators  so assign tasks that everyone enjoys and most importantly enjoy the process of this investment for what its worth. Turn it into fun and something to be enjoyed rather then being a chore. Its a big step in your financial journey for you your friends and your family!

 

Can you do property investment as friends?

There is plenty of risk in a property investment strategy like this one for things to go wrong and great pressure to be placed upon friendship and family ties. By the same token turning this into something positive (something I Property Investment as friendslike to do) a successful or even negative result could bring a group of investment partners closer through common goals and striving to achieve great things. You may want to give some considerable thought to your personal financial standing (have a read over here about Getting a mortgages right now) and how this will affect your spending habits and budgeting. (You do budget and plan your goals right?)

 

 

Want to learn a little more about property investment? Fnding the right place and making an offer?

By the way I know I haven’t talked about occupying a place you purchase with friends in this article…stay tuned 🙂

 

Note: There are a bunch of legal terms, contracts and such things I haven’t talked about here. I am more challenging your mindset to think about wealth creation in out of the box creative ways. Always get some legal advice as a group here to make sure you covering yourself, your family and your investment partners.

 

 

Now family or friends thinking about property? Enjoyed my writing today? Don’t forget to share on the left!

 

***Photos thanks to Mr.Thomas, Rakugo, Sunshine City & Kenteegardin***

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