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Group of friends wanting to invest together - can anyone give us advice to get us started?

Discussion in 'General Property Chat' started by KAKE, 5th Mar, 2016.

  1. KAKE

    KAKE New Member

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    Hi,

    My husband, myself, his sister, her husband and a friend are wanting to pool our resources together and buy a property to renovate and sell for profit. Amongst the group we have a carpenter/builder, accountant, procurement officer, legal professional and a law enforcement officer. We have a long positive history together and each of us has our own investment property separate to the upcoming purchase.

    We all live on the Northern Gold Coast and want to purchase in our local area. We plan to buy a freestanding home, renovate it and then upsell. We have trusted plumbers, electricians and builders we can call on to help us renovate if needed. All five of us will contribute an equal share of deposit/costs for purchase, as well as contributing equally to the cost of materials/purchases necessary to complete the renovation. Of course we will rely more heavily on the skills of the carpenter/builder and accountant during this process and their expert knowledge and abilities must have a value........

    My questions are.....

    Has anyone on this forum been a part of a small investment club like this? If so, what were your experiences both positive and negative?

    What legal framework did you use to set it up?

    One couple will live in the house while it is being renovated, they will be paying reduced rent during that time. Would you suggest a lease be signed for the tenancy?

    How would you suggest we put a value on the work done by the Carpenter/Builder, Accountant or general labour by the rest of the group when working out the final profit share at the time of the renovated properties sale?

    If anyone could give us some advice on how to start this process and formalise it so we have less hassles down the track it would be most appreciated.
     
  2. Bran

    Bran Well-Known Member

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  3. twobobsworth

    twobobsworth Well-Known Member

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    Why does someone "have to" live in it. I would be getting in and out.
     
  4. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    This sounds like it will be messy even if everything goes well.

    I would be getting the carpenter and accountant to quote their costs up front so there are no allegations of gouging at the end.

    I agree with @twobobsworth worth, get in and out. It should be purely business to reduce potential issues.
     
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  5. willair

    willair Well-Known Member Premium Member

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    Just have a serious think about this,most even all that i know who have gone down this road end up not being mates for very long,just like standing in front of a high speed fan ,and one of the fan blades brakes..
     
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  6. Tim86

    Tim86 Well-Known Member

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    The profit split between so many surely wouldnt be worth the time and effort would it? Especially after all the taxes and selling costs.
     
  7. Johnny Cashflow

    Johnny Cashflow Well-Known Member

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    My advice would be not to do it
     
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  8. herenow

    herenow Well-Known Member

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    Sounds messy.
     
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  9. bob shovel

    bob shovel Well-Known Member

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    It does sound messy but could be done.
    Step 1... contracts

    Why not buy one each, all similar house and price. Or 3x units then all Reno each the same /similar. Then hold in your own names?
    That way the hard stuff is shared plus you'll have buying power to buy in bulk,it may keep the "business side" cleaner??

    Perhaps buy a small unit block or flats?
     
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  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    More risku than buying on your own because 1 person can pull all of you down.

    Also can be adverse effects on borrowing capacity.

    I think i have writen a legal tip on this - buying property with others.
     
  11. Ted Varrick

    Ted Varrick Well-Known Member

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    Hi KAKE,

    I hope this works for you, but, just to trim down some of the rough edges on expectations, it's well worth watching this short inspiration clip on investing with friends and/or family...

     
  12. Ember

    Ember Well-Known Member

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    How long do you expect the renovation to take? Be sure your goals align as to when to sell and for what price. The couple who live there may decide they want to drag out the process as they enjoy living there. This has happened to my colleague at work. He had purchased a house with a friend and the friend has moved in rent free while they renovate. That was 18 months ago and not much renovating has actually occurred.
     
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  13. WattleIdo

    WattleIdo renovating Premium Member

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    This may be true but the opposite can also be the case. Renovations can take forever and it's definitely not fun living amongst it.:(
     
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  14. wylie

    wylie Moderator Staff Member

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    Without wanting to knock the idea, I cannot fathom how five owners can each make anything from a renovation when you consider the buy in costs, renovation costs, selling costs. If you hold it for twelve months you can halve the capital gains tax, but if you do this a few times, you would be treated as doing this as a business and would lose that concession (I believe).

    Add in someone with a trade or other talent that will do more work than others. Add in someone living there and adjusting for both those things.

    Add in problems if someone cannot meet the repayments, or loses interest, or needs their money back for something else, or doesn't pull his/her weight. I think it is a problem waiting to happen.

    I think you are better not going into this. Or doing it on your own.

    Edit: We charge for work done on properties held in a trust, have ABNs to do so, and that way, whoever does the work is paid for the work, just as we would pay a tradie.

    I also recall buying with my ex-boyfriend, my brother and my father. Before we could make any money my brother needed his money back to build a house for his new bride. So, we had to sell. My ex-boyfriend's new girlfriend was not happy at all that he was spending time with me renovating a house. So many issues that could (and did) go wrong.
     
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  15. RenegadeDom

    RenegadeDom Well-Known Member

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    This has the potential to be extremely messy, and at the best of times renovations don't go smoothly. Not saying it can't be done but I think for the time and effort and potential headaches the end won't justify the means.
     
  16. hammer

    hammer Well-Known Member

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    I invested with family. We just started talking again after 2 years of silence. No amount of money is worth that.

    Who knows though? Your plan might turn out to be peachy. Just understand that your risks are more than simply financial.
     
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  17. adrian_christian

    adrian_christian Well-Known Member

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    Don't. Do. It.
     
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  18. Inov8ive

    Inov8ive Well-Known Member

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    I think if you do a proper forcast you will soon see that it won't be worth it. As mentioned, with all the buying/seeling costs involved it seems you guys have more to lose than gain.
     
  19. bob shovel

    bob shovel Well-Known Member

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    Wow quite unanimous... Way to smash dreams team! :p

    But yeah buying, reno, selling is pointless. Just looks good on tele when they don't show all the numbers ;) reno, refinance and hold is better. You guys should look into that
     
  20. legallyblonde

    legallyblonde Well-Known Member

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    Do you have any idea how much you would be expecting to profit? With acquisition costs, holding costs and selling cost.... Whatever is left over probably won't go far once split five ways.