Investing with family and friends - Where to start?

Hi,

Group of 4 of us, all working 9-5 would like to start investing. Will like to get your suggestions on where to start

1. What type of trust we should consider
2. Any legal things we should note down

Thanks

 

First question, can you do it without your friends in separate investments? If things go wrong, it will be much easier if you have 100% control.... and if things go right, well.... you want 100% control too... what if 1 person needs to sell?

 

Hi Gockie,

We are pooling up money about 400K and want to set this aside for investing purposes. Our goal is for Capital gains, reinvest again for capital gains.

Everyone is on the same page about this goal and we have agreed that we would set aside this money.

 

Get a lawyer to draft an agreement and it has to be water tight... And who does what etc. What's the expertise of 4 of you? Equal monetary contributions? Spend good money on good drafting, don't try to save on legal fees.

 

Many reasons why not... do a search on Somersoft...

I was looking to buy in Brisbane, place was owned by 5 people. Bank would not let the sale settle. Something to do with the complexities with having 5 owners. Contract crashed. And that's just the surface.
You're going to have 4 different opinions on everything, and what if someone has a baby and needs their funds?
Why can't you do your investment yoursrlf?

And... even if I was suggest where to buy, you should not go in blindly without doing your own research. And there's plenty of comments on the forum....
If you can't pick up 1 + 1 by reading what's here already, your going to be at the mercy of the markets.

Sorry it sounds blunt, but just being honest and my honesty can save you well down the track....

 

No, thanks for your suggestions. I really appreciate.

We set aside this money from the past 5 years and we're doing business. And all of us have good jobs with good pay. So, pulling out is not an option for us.

Can't you set up a trust and buy in trust names?

 

Pulling out is ALWAYS an option (ie BEFORE you go into the deal.... after, not so easy), and in 99% of cases like this, is the very smartest option.

 

It is very state dependent also. Different state's land tax regime's can kill your cashflow if the wrong structure is used.

you could have
partnership
partnership of discretionary trusts
unit trust with units held individually
unit trust with units held by discretionary trusts
company with shares held individually
company with shares held by discretionary trusts

 

I think this can be good, but you have to carefully structure things so as to reduce risk and to reduce the impact on borrowing capacity.

You don't necessarily need a trust.

 

See
Legal Tip 111: Ways to Structure Joint Ownership of Property Legal Tip 111: Ways to Structure Joint Ownership of Property

 

And if one person dies ?
And if one person becomes bankrupt ?

Pulling Out is not an option....today. Things always change.

A recent concern with NSW Land Tax unit trusts comes to mind. Such a trust requires that all unitholders have an absolute right to redeem units. So think of this. Imagine if Sue and Bob's marriage breaks down. Sue's lawyer gives Sue advice to request redemption. How will that work ? How does the Trustee company operate if three or four Directors say No....What happens if meeting rules for the trustee become relaxed and a breach occurs ??

Loads of issues. I would start with some basic legal advice to get a better idea on structure for your combined needs. Property location, value and personal issues will all affect choices. +ve v's -ve gearing issues etc etc... Super involved or not ?

 

No Super involved