partnership problem... names on title when one party is a company

[distew]

Hi,
Three friends are pooling resources to buy some investment properties. The problem we have is that one of us needs to buy investment properties under a company anem as she has previous company losses, hence will not have to pay capital gain on sale of property. The other two want to purchase: in individual names. Does anyone know what do we need to do in relation to finance and the title.....thanks...Di:

 

[alexlee]

Don't do it.

 

[yo yo ma]

Don't know about the company name... Have you thought of plans if next year, one of you wants to sell and the others can't afford to buy him/her out? While plans like this start out well, they can sometimes fail. Make sure you consider all options before going ahead with it...

 

[Welcome]

Could use a unit trust? But if they are "friends" instead of investing partners I would agree with Alex.

 

[alexlee]

A couple of questions you need to ask yourself:
1) Why did you choose these friends to pool resources and buy? What skills do they have? What skills do you have?

2) What is your long term plan? What happens if one person wants to sell? What price would they sell at?

3) How will you agree on where to buy? You say you're going to buy 'some investment properties'. How many? How much can you borrow? Are you aware that if you buy in joint names, for example, banks may assess you based on the debts of the ENTIRE property (not just your 1/3 share) for future serviceability?

4) How much investing experience do all of you have? Have you purchased before? What are each of your goals?

5) How much do you know about the finances of your friends? Credit card debts? Personal loans? Family responsibilities? Job security?

6) Are you in fact able to buy a 'normal' property on your own? Or do you want to pool your resources so that you can get something bigger (refer to experience question above)?
Alex

 

[skater]

Like Alex said, "Don't do it". I would see this as way too risky.

 

[LynnH]

I am with Alex and Skater on this one. Particularly pertinent, I think, is Point 5 made by Alex in his post above: unless you have a good knowledge of your friends' finances, you really have no idea of what you are letting yourself in for. Don't do it.

Cheers
LynnH

 

[tubs]

You may find that you, and each party, will be held jointly liable for the entire loan, so if the other two partners go bankrupt, or just decide not to pay, then the bank will consder you to be responsible for the whole lot. Or to be more accurate, they dont care who CAN'T pay, EVERYONE is responsible for paying.

The big problem here is that your serviceability will still be seen as responsible for the whole amount, not a third of it only.

Please, others correct me if I'm mistaken.

 

[Raddles]

Hi there
apart from the issues raised by other forum members - if you still want to proceed - there is nothing wrong with having properties held as tenants in common with 2 individuals and 1 company nominated - as the owners of the property.
The financing may be a little tricky for the person with the company but it is doable.
thanks

 

[sailor]

I own a couple of properties jointly with "a friend", we have one in joint names and one in an HDT where we are the only beneficiaries. BUT this is a friend I have had for years and years. We know each others finances inside out...there are no secrets.

Both properties are +vly geared and pay their respective IO loans. The CG has been good to us, so now LVR is down around 50%.

Having said all that, I would not do this with anyone else. I would ensure that I knew everything about my co-investors before I went anywhere near this deal.

 

[distew]

partnershipe

thank you all for your points which have been taken on board. We went through each point today and believe we have them all covered. We are long standing good friends of 20 years, one has extensive experience with IP, the second has IPs and a legal background and the third has had previous IP with accountancy background. We will being doing a business plan to cover all the what ifs, a legal agreement etc. We have since found one bank, st.george who will put three names on loan even if one is a company. As long as its the same names on the title.

 

[alexlee]

Given this, exactly why do you need each other? Why not just buy properties individually, but share research and experience?
Alex

 

[skater]

Given this, exactly why do you need each other? Why not just buy properties individually, but share research and experience?
Alex

Is it purhaps a very expensive property that would need all three incomes to service it?