Investing In Property With Few Mates? The good, the bad, and the best way

Is it a good idea to put your heads and finances together to buy an investment property?

Getting together with a number of mates to buy property can be a great way to help you get a flying start on your investment strategy. With a bigger deposit and the potential to borrow more, you can get the right property in the right area, buy sooner, and pay off the investment loan mortgage sooner. So bigger the number of mates pooling the resources together, bigger the rewards.

So let’s say you pool your resources into the property. Then you find yourself wanting to buy a family home and you need to free up some funds, but one of your overly optimistic mates doesn’t want to sell. What started as a convenient partnership could all come to a messy end – and at what cost to your friendship?

Think of your joint property venture as a business for long run

Property investment gains are rather usually made in the long run. There are instances where a certain growth period may be higher than rest, however, due to its inherent nature of being relatively less liquid, investing in property should be treated as running a business and that’s where friends investing together can work.

If you are all prepared to make the commitment of time, money, and effort to get the best outcome, then there are definitely benefits to such a partnership, as it can increase your loan borrowing capacity and buying power. It is certainly helpful when it comes to joint property investment.

Detach your emotions towards your investment Property

Keep your emotions at bay when it comes to your joint investment properties. Try not to get attached to your property. Shared knowledge and experience can also add value to the arrangement.

Always look out for investment properties that will bring you bigger returns on your investment. Perhaps one of you can spot a property with the potential to renovate for higher rental return or capital gain. It could be easier said than done. However sticking to the strategy of treating the property as an investment asset of a business which is being utilised to generate wealth, would make it easier.

The other people might be better at understanding and dealing with everything related to property financing and can work together. You can always seek help from an experienced mortgage broker to help you find your investment home loan that suits you most.

Agree on your goals and set time periods

If you’re planning to buy any kind of property and are going to share the commitment with someone else or few of your mates, it’s crucial to agree on your goals from the very beginning. Having a mutual understanding of what you’re planning to achieve and how you’re going to make it happen can go a long way to avoid conflict and problems in the future regarding your investment property. Be aware of these crucial questions and answers such as how long you are going to keep it at least and your expectations on the property return.

Whenever you’re going to buy an investment property on your own or with somebody else, these are the key questions you need to be aware of. How much you can afford, what kind of property to buy, and what type of loan you may need. If you’re in a partnership, you need to agree on how long you’re planning to stay invested and what will happen if one of you wants to sell early or pull out. You wouldn’t set up a business together without getting legal and financial advice. So it’s worth doing the same for your investment partnership.

It is also important at this stage to involve a mortgage broker to get a better understanding of the scope of your property finance or investment loans.

Shared finances and information

There are some new loan products on the market that are suited to investment partners which can be easily applied for mates wanting to invest in property together. An expert mortgage broker can help you arrange all these different options and features to your loan that suits your specific individual needs.

Investment loans with ‘Split’ option are very common across joint property investment loan borrowers. It is basically one mortgage, shared across two loan accounts. Each borrower makes their own regular loan payments and even can make extra repayments if the loan structure allows that.

There is also a property share product offering two separate loans on a single property, one in each owner’s name, which can be useful for keeping finances separate but you have to sign a guarantee for the other person’s loan in case they default. So at the end of the day, you are still sharing the liability for all the finance secured on the property.

Whatever loan you choose, it is always important to get an independent financial advice on your joint property buying arrangement.

So are you thinking of buying an investment property with your mates? Give us a call today to discuss your property financing options.