Should you invest in property with friends or colleagues?

September 10, 2018

Property investment is a very well-planned decision. It involves use of bank’s money ( most of the times) , signing of legal documents and  a waiting period until the property is sold for profit.

There are few steps to follow before you see dollars coming. I am not trying to scare you off or making it look difficult to invest in property. From few friends to large syndicates, there are so many ways to do things but the truth is that when there are different parties involved  for an investment, things may not work as you planned or work better than you expected.

Apart from increase in the budget because of more people involved in borrowing money, there are some pros and cons. Lets discuss some positives and negatives.

 

Pros:

 

1. Efficiency and innovation

 

Teamwork can lift the game and save time. Ideas come from different minds that can make the project innovative and cost effective. Renovation and development projects are best suited to more than one brain.

 

2. High turnover

 

Projects can move faster. Multiple properties could be bought whether new or old and profits can be churned faster for new acquisitions.

 

3. Better negotiation

 

Because of the involvement of different skillsets, people can use their contacts to get better deals on materials and professional services.

 

Cons:

 

1. Measuring the degree of involvement

 

It will be difficult to measure the degree of work done by all. For example, when a property is renovated most of the work is done on weekends and all the people involved in the project may not be tradies or people who work on weekdays only. All the people involved will have different set of skills most of the times.

 

2. Unpleasant arguments

 

As everyone has a different way of thinking and executing ideas, the differences can lead to arguments and potentially cause the engine to be turned off before taking off.

 

3. Premature exit

 

If there are few parties to a deal, it doesn’t mean that everyone will be riding the car until the destination is reached. If someone’s plan changes in the meanwhile, it will be a difficult exit. The whole project might have to be grounded to part ways or others have to buy out the exiting party.

 

4. Untimely demise or sickness

 

If anyone in the project passes away or is unable to work due to sickness, then others won’t be able to drag for long. On a sympathetic ground or for a fair deal, the property might be offloaded before the time comes.

 

5. Legal complications:

 

Not everyone is a champion of contract paperwork when there are so many legal terminologies involved. Some people just leave the legal work to the brightest mind in good faith. This can be a big trouble later. When it come to  liability for any damage or unforeseen circumstances, blame game can start and not everyone will be ready to share the burden even if they agreed before.

 

Having said that, investing in property is not difficult as long as you weigh your options and seek professional help when in doubt. Always do what suits best to your personal circumstances and financial situation.

 

 

 

 

 

 

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RLA 28 68 00   ABN: 24 624 824 175

250 Wright St, Adelaide 5000 , South Australia

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