Buying a property with a friend

We all know you should not mix business with pleasure but many of you would have.

Who has purchased a property, or, properties with a friend and how did it go/ is it going?

 

Done it 4-5 times

Once ended up in court and won
Second time got money stolen from communal account but let it slide
Other three times with same guy, going well

Going into business with friends is ok, look at Bill Gates and his mate Allen. But honestly, most people are more trouble than they’re worth, and I’d be super careful.

 

Nope nope and nope.

What happens if one needs to sell and the other doesn't want to? What happens if one doesn't wish to reno and the other does? What happens if they cheat or steal from you. So much risk and so many what ifs that it is not worth the hassle

Do it yourself, share an interest and advice with a friend, help eachother but I certainly wouldn't share a property with a friend.

Just my 2c

 

Ive done it in the past and worked out ok

 

I got completely shafted by an ex business partner/ bestfriend one day out of the blue. It cost me a lot and I learned a lot.

This prospective purchase is a buy, renovate and flip. No longterm proposition and we are having a deed/ memorandum drafted expressly agreeing the exit strategy.

 

Sounds like a JV, as long as the legal structures are in place, it should work out, good luck!

 

There are no rules. It can absolutely work well for all involved. It can also fail miserably. The choosing of the partners, planning and clear outlining of expectations is key to success in any JV. Most people advising against it do so because its far easier to justify the risks involved. Many JVs with friends are entered into without the appropriate planning that would not have been neglected between unknown parties. If a JV with friends helps you achieve your goals and you think you will enjoy the process, then go for it. We all walk our own path.

 

I did, worked out well. Like anything in life, you need to work with like minded people and have clear exit strategies and half yearly review of all the numbers and what to do for the next 6 months. This should include insights into potential change in personal circumstances.

Easier said than done but try and get a sense of their A&L position, last thing you want is to partner with someone that experiences frequent cash flow issues and has no buffers and or takes on unnecessary risk fueled by greed.

Also don't partner with people who are afraid to make decisions - the ones that say "let's just hold it for a long time", "we shouldn't sell now because we won't make as much money or wose even make a loss". Risk management is everything and if you have to cut losses, you should be able to ...

 

Yep also did it with my brother and it was very profitable. The absolute key is a very clear and timed exit strategy.

I would never in a million years do it with a buy and hold strategy. But pooling cash, skill and servicing to do a development (Reno, subdivision, construction.etc) can be a great way to excel financial gains.