Company or Partnership

[siddant]

Hello All,
Me and 8 other friends have joined hands and decided that we shld do investment into property.
First roadblock now is
a) do we write a partnership
b) do we have a company
we do want to have this go for 12-15 years . we all do believe it will.
people who think partnership is good within the 8 people are sayin this
1) easy to setup
2) easy to manage
3) the bank will ask everyone of us to be a guarantor when we buy a property. so going for a company to mitigate the risk of being a guarantor thereby standing to loose all you have got outside of hte business is nullified
people who think company is good are sayin that
1) more secure
2) when someone leaves, we dont have to dissolve and restart the partnership on a property
3) not sure if we can mitigate the guarantor problem after we pay off our first house. so we cant really say that being a company will safegaurd me or the other partners with the full loan to be paid in case the other 8 default.
I shall stop here. let you guys take it away...
what do you think ?
Partnership?
or
Company and why?
if i do miss somkey points go ahead and post em so i can learn
to add to all of this ; what is a good 10 year projection software ; if u hav used one. like say if i chose to buy 350,000 dollar houses over the 10 years ( one every year), it has to show where i will stand after 10 years?
cheers
and thanks in advance
sidd--

 

[alexlee]

If you need to get 9 people together to buy a $350k house, none of you are committed enough or have enough savings / cashflow to be investors. Seriously. Why can't you just buy something cheaper individually? Share information. Share contacts. Get group discounts for stuff.

Most likely, WAY before the end of 10 years you would have lost 8 friends.
Alex

 

[sue78]

I agree with Alex...2 people maybe but 8 is asking for trouble.

 

[softmonkey]

with that many cooks in the kitchen you are better off having a company or trust that has N shares in the asset(s), rather than attaching names directly to the asset. this way ppl can buy/sell their 1 share easily without forcing the entire asset to be sold.

 

[LynnH]

I agree with Alex and Sue ..... you simply cannot anticipate what life/work/personal situation/s that 8 people are going to be going through for the next 12 - 15 years.

Cheers
LynnH

 

[siddant]

Thanks for all the replies.
as everyone said with 8 people in the mix, the biggest question is creating and instilling belief that this is going to work in the long run. for that to happen to make sure everyone knows that this will work, we opted to buy a property of worth ~350K so that everyone gets comfortable in the first year or two, which then enables us to go ahead and invest more and more as we go forward.

hope that brings us back on track into the actual question.

company or partnership or a trust?

once again thanks for all the responses. keep them coming

sidd--

 

[Christie Lee]

I would go for a company with that many people. That way your personal assets eg PPOR are protected if you go bust, provided it's only in your name and not the company's. Also with a partnership you have mutal angency, that is you are all equally responsible for the actions of the other members of the partnership and equally responsible for their debts.

I think a company is a safer option.

Somersoft PIA is a great program. Very quick and easy to use. http://www.somersoft.com.au/software.htm

 

[alexlee]

Siddant, let me ask this, why do you need to get that many people together for what is, after all, a relatively cheap property? Can you yourself, for example, get enough loans for a $250k property, say? If so, why would you want the heartache of doing a partnership with this many people, if you don't have to?

Investing is not like going out with your friends for a beer. Nor should it be a 'I'll try that Jagermeister if you do it as well' type of activity.
Alex

 

[alexlee]

I would go for a company with that many people. That way your personal assets eg PPOR are protected if you go bust, provided it's only in your name and not the company's. Also with a partnership you have mutal angency, that is you are all equally responsible for the actions of the other members of the partnership and equally responsible for their debts.

I wouldn't use a company. No CG discount. If you have to, I would suggest a unit trust. Partnership sucks because you have unlimited liability, though I'm sure the bank would want a personal guarantee for the loan anyway.

Siddant, or are you thinking everyone just put in $40k and you're not going to borrow at all? Remember returns on property are pretty ordinary if you don't jump it with leverage.
Alex

 

[Giulio Taranto]

8 person partnership is madness imo

 

[kman1000]

In what form are the tax benefits realised? I believe there was a Victorian bill passed in response to a ruling pertaining to trust, where some form of "work-around" of tax was vindicated....

I am particularly interested in finding more about obligations of the trustee (s), not including those constructed in the deed. Is there a act/regulation pertaining to the adminstration of trusts and responsibility of trustees? In particular with respect to cases of multiple trustees as to whether signatures from all trustees be required for, say, borrowing on behalf of the trust.

 

[siddant]

I wouldn't use a company. No CG discount. If you have to, I would suggest a unit trust. Partnership sucks because you have unlimited liability, though I'm sure the bank would want a personal guarantee for the loan anyway.

Siddant, or are you thinking everyone just put in $40k and you're not going to borrow at all? Remember returns on property are pretty ordinary if you don't jump it with leverage.
Alex

Hi Alex

Thanks for the inputs. the whole idea is to start off with a small property so that in the first 12 months, it will help all of us believe that its going to work in the long run. after the first year we are planning to get 2 more houses and go from there.

but yeah the biggest question we now face is how to incorporate this..
looks like trust is the way

 

[alexlee]

but yeah the biggest question we now face is how to incorporate this..
looks like trust is the way

I still think you're crazy. Imagine what will happen if the property, for whatever reason, DOESN'T perform as you expect. How do you know one or more of your members are not expecting 20% in the first year?

Actually, I have to ask this as well, Siddant. Do you have any experience with property investment?
Alex

 

[siddant]

Last year i just bought my first property in victoria and sold it at 46% increase and reinvested it all back into indian markets coz of a stronger market there.

whatever exp i have is very little i guess.

sidd--