Pool money together to buy Properties

Has anyone tried or thinking to do:-

Let's say 10 people/users/partners contribute $50K each and buy couple of properties to get into the property investment (With clear investment strategy, rules and compliance with legal aspects).

 

There are syndicates that do that

 

yeah called properties trust and there are lot of them on the ASX
and if you do that with the Lowy in 60s with $1000 investment, today it worth $44 million with the announcement of the takeover

I haven't been that long since the 60s but they made me a lot of money

 

Messy. You want to joint borrow between 10 people? What ownership entity? When to sell, how to sell? What happens when those people want to borrow for their own properties?

 

Is this method successful?

 

Thanks @Simon Hampel -will check it out.

 

Hi @Trainee ,

It is just an example but if trust or sydicate is being setuo then the loan will be on 1 sydicate/trust instead of looking at 10 people Hence strict business rules and legal compliance to keep everyone on same page!!

Above all is my assumption/understanding- i am still learning

 

I think you can also set up yourself using unit trusts and now cryptocurrencies

Apart from knowing it can be done, I can’t comment on how.

Perhaps one of the accountants here can step in....

 

This money can be used for shares as well if investment strategy allows to invest in property and shares.

 

Consider the personal guarantees too

 

Thanks for weighing in @Terry_w

So it can be done?

 

It can be done but would I join it no especially if personal guarantees are involved.

It is like starting up a business with 9 other people or getting into bed with 9 other people, you better hope that everyone is on the same page or don't have STDs.

Also think of your exist strategy before you jump into bed as you don't want to be the one on the taking all the load (pun fully intended).

 

Yes, but not something I would like to join into myself.

Once I was out with about 9 people and we had to decide on a place to eat...That was hard enough.

I have also set up structures for groups of people to joint forces. I don't recall any that actually did anything.

 

We do setup unit trusts with up to 20 investors all the time. Also setup larger ones but they are much more difficult because of AFSL lic.

Ours are usually for property development though, not for buy and hold. No reason it couldn't work for buy and hold it's just harder to have a clear exit strategy in that situation so harder to get people to commit.

Typical scenario we do
1. option a block of dirt with development potential
2. individual funds the option and preliminary development assessment (advice, drafting and pre-lodgement meeting with council)
3. Put together info for potential investors
4. gather investors
5. establish trust and related structures
6. assign option to trust
7. lodge DA
8. start pre-sales
9. get DA approval
10. Exercise option and settle land
11. contract for works
12. Once pre-sales exceed val of works contract get finance to pay for works
13. works complete
14 titiling
15. settle
16 pay out debt
17 pay out unit holders

The key here is that cash is paid for the land and because of that, the 100% finance cover in pre-sales and the low LVR, the financier only wants personal guarantees from directors of trustee, not all the unit holders.

 

What kind of returns (%) can investors typically expect for this type of investment (on average)?

 

usually somewhere in the 20's over the project period. Sometimes better, we did one that was north of 40% but that was helped by Govt changes to infrastructure during the DA.

 

This is a ripped off check it their entry and exit fee this is mainly run to benefit the runner of this business not investor
I don’t know why people even bother
They heap better off buying listed REIT on the asx

 

How about Property Chat Group PCG
Set up by @Simon Hampel with advice by @RPI and books by @Terry_w
PCG, set up by and run for the benefit of those investing in the group.
With the knowledge base on here it would surely be successful (could even have a subforum here for those investors)