Partnering with friends - good or bad?

Before I seek professional advice i would like to get your thoughts on partnering with a friend to increase our buying power and buy a better property.

Say on a $500K loan ($250K each) both of us could service the debt on our own, but prefer not to have such large out of pocket interest repayments.

So far I've learnt the following needs to be considered:

1. Joint and Severally Liable - we'd both be entirely liable for the debt if one defaults
2. #1 will affect future borrowings as the entire debt will be considered as yours by the banks.
3. Risk if one wants/has to sell for whatever reason earlier than initially planned

I imagine all income/expenses can be split 50/50 between the two of us?
 
I personally would not do any business with friends or family. Too many things can go wrong and that could come back and effect the relationship as well as the business.
 
Stay away from doing deals with friends/family. It will just end in tears. The effect on your future borrowing power / growth is really costly. Just start with an investment you can manage by yourself and grow from there. It will be a lot better in the long run.

Gools
 
.. increase our buying power and buy a better property.

What makes a more expensive property "better"? :confused:

Some of our cheapest properties (eg 1BR apartments) had great yield and great CG.... whereas some of our most expensive (eg our PPOR) has probably not grown that much.....

Cheers,

The Y-man
 
x452, I have a friend who has asked on several occasions if I would join her in an investment venture. As I value her friendship more, I have say "No thank you" each time. Devil's Advocate theory dictates that things will not go as smoothly as one might wish .....
Frizzle
 
One says:
"...Entering a marriage relationship is always rosy, cosy, easy. But getting out is deadly and costly..."

Another says:
"... A fool with a bag of money will soon part..."

Kiyosaki says:
"... Two losers get together trying to make a bigger deal so that they can make more money, only find they will lose more..."

You say:
? ? ?

:)
 
If you can borrow and service a $250K loan then you can afford an IP on your own.

Joint investments CAN work well, but can also go horribly wrong.

Do you want to take the chance?
Marg
 
Maxwell says when a person with experience and a person with money get together, the person with the money gains the experience and the person with the experience gains the money :)

ta
rolf
 
Maxwell says when a person with experience and a person with money get together, the person with the money gains the experience and the person with the experience gains the money :)

ta
rolf
Classic Rolf! And this has been my experience too. Unfortunately I was the one less experinced. Lesson learnt.
 
What makes a more expensive property "better"? :confused:

On the flip side of this, if "bigger is better", why would you stop at partnering with one person? Why not partner with possibly thousands? There are already such structures in place that you can invest into - eg RE investment trusts

Cheers,

The Y-man
 
My wife & I bought in on an IP with my sister, and it has worked really well. But it has crimped our lending limit, because the bank regards her 50% share of the IP loan as effectively ours. So now that she wants us to buy her out we are more than happy to. For this reason I wouldn't partner up again.
 
I have very rarely seen this to work successfully - however that is not to say that it can't work well. Make sure that you get a proper partnership/joint venture contract drawn up that will detail all expectations and exit strategies.

Wishing you every success,
Ana Stankovic
Winning Formulas for Success
 
I have very rarely seen this to work successfully - however that is not to say that it can't work well. Make sure that you get a proper partnership/joint venture contract drawn up that will detail all expectations and exit strategies.

But unless you're willing to go to court to enforce your contractual rights, what's the paperwork worth?
 
Well the main thing is to sit down and have the conversations so that expectations are set upfront about who would do what, how much time each person would invest, what skills they can bring to the table, how much money they can put forward and then also in the what ifs.. what if one person looses a job, or gets sick, or has a financial setback...

The more of the points you discuss upfront and decide on how to handle them, the easier it will be to start off from the same point and hopefully prevent situations becoming problems in the first place.

Wishing you every success,
Ana Stankovic
 
I've done biz with family and with friends, and never had any dramas.
Quite the opposite. Sure I've seen some interesting "situations" from time to time, but it all comes down to being upfront with a plan which of course includes exit strategies.

Someone who says "you can't trust anybody" is not to be trusted themselves.
Because they will try to screw you before they think your gonna screw them.
Because to them nobody can be trusted.
And it also tell about the crowd they hang out with...

I think it's better to do bizness with people you know.
The better you know them, the more you will know if they are suitable or not for a particular type of biz.

And before you reply think about your own situation...
Are you married? Defacto?
Well you've just done a biz deal with someone you know or maybe was a total stranger. One that is worth 50% of whatever you may ever earn.
So before you give others biz advice, think about your own biz partnerships first.

It's not about paperwork, it's about understanding the arrangement upfront and knowing who your dealing with.
Now if the potential partner is someone who's always scrounging for a dollar, or spends every weekend in the casino, then you need to take that into account in your decision to go ahead or not.
Had it been someone not close or related, you would not know that info.

I have personally done biz worth up to hundreds of K's on a handshake with ppl I know.
Of course you can't do this with anybody, that's why it pays to know people who are close to you as they can be the best biz partners. I posted about one of these a few mths ago.
And I'm the "doom & gloom" cynical #$&+'s round here...

Either way, good luck.
 
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My wife & I bought in on an IP with my sister, and it has worked really well. But it has crimped our lending limit, because the bank regards her 50% share of the IP loan as effectively ours. So now that she wants us to buy her out we are more than happy to. For this reason I wouldn't partner up again.

Exactly. Sorry to hear that Belbo.

This can also work though.

If you have reached a serviceability level with the banks then adding another income to your loan can make an incredible difference.

Personally, I think it depends on the family and your financial situation. :)

Regards JO
 
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