All Topics / Help Needed! / investment partners

Viewing 7 posts - 1 through 7 (of 7 total)
  • Profile photo of ettyetty
    Member
    @etty
    Join Date: 2007
    Post Count: 23

    Hi

    I'm looking to buy an investment property with a couple of partners  (not related) and have no idea of the potential problems or pitfalls in this strategy . If anyone has any ideas , suggestions, experience  I would love to hear from you

    Thanks Etty

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    I have not done a joint venture but I am planning to get into this sort of thing down the track.

    The pitfalls are more to do with being prepared in case something bad does happen
    With an agreement it makes a bad event not so bad as everyone knows how this will be handled.

    but what you need to consider
    !. What if one of you die how does this affect the investment
    2 What if one of you divorce how does this affect the investment
    3. What is the time frame of the investment
    4. If the investment makes a loss how is this going to be handled
    5 if the investment makes a profit how is the profit divided between the investors
    6 What special skills does each partner bring to the venture.
    7 How much does each participant invest into the venture
    8 what ownership structure are you going to employ. Unit Trust, Hybrid Trust or just a tenant in common ownership.
    9 What if one of you pulls out of the investment early how is this catered for.
    10 Do all partners really have the financial means to cough up the cash once you are committed to a contract to buy a property?

    Discuss these issues with all partners and then
    GO to a commercial lawyer and get a joint agreement contract drawn up.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    The biggest problem I have seen is when one partner wants out. Plan for it.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of cubman09cubman09
    Participant
    @cubman09
    Join Date: 2009
    Post Count: 37

    Etty,

    Terry is right. This could be a major stumbling block especially if it gets nasty. Have seen it happen before.

    Have an exit strategy in place as that party who doesnt want it anymore may stop making payments etc. Caution and your due dilligence should be paramount.

    Kind Regards,

    AM

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Quite.  Even if everyone starts with all good intentions, people can have a change of circumstance during a project.  Here are a couple of scenarios:

    – a project partner could run into some marital trouble and wish to get divorced.  Under such circumstances, he/she might hope to pull his/her money out of the project at a time that is not particularly convenient to the other partners.

    – heaven forbid it not happen, but let's say a partner takes ill and passes away.  Depending on what type of joint arrangement you have, it might be the case that by default, all other partners immediately inherit equal portions of that person's share.  Or it might be the case that the partner can leave his or her share to a beneficiary.  Suddenly you find yourself working with a partner you've never met before.   This person may not be able to offer the same skillset to the project that the original partner had.

    that's just a couple…

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Marriage is the main one, that I have found.

    Another major factor to think of is bankruptcy.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of never too latenever too late
    Member
    @never-too-late
    Join Date: 2009
    Post Count: 18

    I could be game. My criteria would have something to do with a certain time frame factor, no exceptions…Ie, everybody knows they have super to look forward to but cannot access it, same for this type of project. Two /three years contracted maybe…Quick turnaround.

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