Hi guys,i was wondering what is best way to buy an investment property with another person. Set up a separate company? Start a partnership? Start a Trust? we have long term goals to acquire more properties as part of our investment portfolio for the future.I currently have an existing PPOR property, I bought about 8 months ago under my name. I placed a 20% deposit. Can I take some equity out to buy the investment?lets say I bought the property at 250K and placed 50K deposit. Can I take out say 25k out to buy another investment? Please let me know.Cheers,cats
Property can be bought in partnership in a variety of ways, and the "best way" is usually a function of your intentions, be they investing, trading, developing, improving etc. Whatever entity structure you use, you need to be sure to document the plan and the roles each of you have.
One method you didn't consider in your post is a simple Tenants in Common arrangement whereby parts, or shares, in the property are held by the owners in relation to the ratio of ownership. For example you might own 1 of 4 shares and your friend/business partner owns 3 of 4 shares, or you might own 1 of 2 shares each.
As for extracting equity from your property, there are brokers who can advise you on the best approach for this strategy, but my own experience is that it's not as easy is it was!
Good luck with your plan.
Hi cats
Yes subject to the current market valuation and lender with whom your current loan is with you could access equity upto 90% of the market valuation of the property.
Buying with someone else can be a way into the market buy you would both want to have a clear agreement written so that you dont end up falling out over it. Normally a clear exit strategy would be recommended in case 1 party wants to sell and the other doesnt.
As for structure this will vary but normally a Discretionary Trust with a Corporate Trustee and the shares own by DFT could work.
Just need to bear in mind that buying with someone else will have a bearing on your own serviceability in the future as lenders will only take 50% of the Gross rent into consideration however will look at 100% of the loan liability so you actually end up going backwards as far as borrowing power is concerned.
Richard Taylor | Australia's leading private lender
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