Where can I find Investing Partners?

Discussion in 'Property Information Resources & Tools' started by Iantheexpert, 29th Nov, 2016.

Join Australia's most dynamic and respected property investment community
  1. Iantheexpert

    Iantheexpert Member

    Joined:
    22nd Oct, 2016
    Posts:
    13
    Location:
    Adelaide, SA
    Hi, everyone. I'm on a tough journey of building a healthy portfolio and it has been quite difficult locating investment partners. Currently, I have $80,000 for investing in property and very much open to networking and finding like-minded people who are in the same boat who can contribute the other half ($80,000) for good investment properties. I have done my fair bit of research and had a chat with various developers too.
    Any advice on where I can locate and get in touch with investors will be highly appreciated. Websites, Magazines, and Experts to ask from will be much appreciated too.

    Thanks.
     
  2. Westminster

    Westminster Tigress at Tiger Developments Business Member

    Joined:
    13th Jun, 2015
    Posts:
    7,440
    Location:
    Perth
    Why do you need a partner? $80k will get you quite far by yourself and to be honest it's a lot simpler if you do it by yourself.
    Adding investment partners to the mix raises the risk and complexity by 3000 fold. The costs and hassles rarely outweigh the upside of it.
     
  3. Ross Forrester

    Ross Forrester Well-Known Member Business Member

    Joined:
    30th Oct, 2016
    Posts:
    1,807
    Location:
    Perth, Western Australia
    If you approach 20 people (or less) in under 12 months and raise less then $2m you can do so without a prospectus (s708(1) Corps Act).

    The $2m can be used a deposit for a bigger project.

    It is important to track the people you approach. I have seen investment documents numbered so that clarity is about who has been approached and when.

    You cannot stick an advert in the paper asking for people to stump up cash.

    Their are exceptions for sophisticated investors which is why everybody targets them.

    As a guide right now, especially in Perth, nobody is putting up money. It is all cash. If something does happen it happens with a pretty safe proven group.

    I know a couple of guys who have started doing this and over 20 years built a good model. They would more than likely have a coffee with you if you are serious. I can set you up.
     
    House and Iantheexpert like this.
  4. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    11,677
    Location:
    Perth
    I have gone in with a mate on a property 50/50 and it worked out ok. That said, there have been issues. Say one partner wants to hold and the other wants to sell or one partner wants to develop and the other wants to hold. Then if you are building there are shared decisions to be made about builder, design, finishes, colours etc. Can get messy if you are not on the same page.

    The other issue I am finding out about is finance. If you go for a loan 50/50 it is more difficult when you want to buy in your own name. The bank will count 100% of the original loan as your responsibility but only assign 50% of the equity.
     
    Iantheexpert likes this.
  5. Iantheexpert

    Iantheexpert Member

    Joined:
    22nd Oct, 2016
    Posts:
    13
    Location:
    Adelaide, SA
    Hi Westminster, I am currently eyeing a development which might be difficult for one person, mostly so on the financing part of it. However, if I was focusing on a single house/property, I agree it would have been much simpler for me to go alone to minimize risk.
     
  6. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,269
    Location:
    Perth, WA
    Frankly, I can't think of any sort of property project worth bringing in a partner for the sake of $80k. Might be different if we were talking on a bigger scale.

    Are you sure about this project? What is particularly special about it that you wouldn't rather just find something else to do yourself?
     
    EN710, Terry_w and Iantheexpert like this.
  7. Iantheexpert

    Iantheexpert Member

    Joined:
    22nd Oct, 2016
    Posts:
    13
    Location:
    Adelaide, SA
    Hi Perthguy, my plan is that we will research and agree on all the issues (colors, finishes, design,finance e.t.c.) before we start on the project to minimize risk. We will also involve an architect for such advice.
    On the issue of finance, I find it better for partners to open a joint account where the responsibility, as well as equity, is assigned at 50/50%.
    Thanks.
     
  8. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    11,677
    Location:
    Perth
    That's fine as long as you don't try to go too far with that structure. I suggest you talk to a good finance broker about the implications for future finance. My understanding from past dealings is banks assigned 100% of the debt to me, even though I was only responsible for 50% of the debt, but they only counted 50% of the equity as mine. This explains it better:

    All parties are liable to all of the debt (joint and severally liable) but only entitled to their share of the rental income – the repercussions are very significant.
    Buying property with a partner - tenants in common

    I'm not saying you shouldn't do it, just be aware of the implications. As I said, I have done it. It worked out ok. Not sure I would do it again though.
     
    Iantheexpert likes this.
  9. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    5,911
    Location:
    Perth WA
    Regardless of what you decide together, the risk is 100/100% in the banks eyes. So if your partner dies/leaves/ruins everything, the whole lot is yours.

    Likewise, if you decide to do something on your own later and need finance, the banks will treat 100% of the first debt as yours, despite the fact there's another party involved. And to add to the pain, they'll only take half of the rental income. So think carefully before going down this road, particularly if you intend to hold the property long term.
     
    Perthguy and Iantheexpert like this.
  10. Iantheexpert

    Iantheexpert Member

    Joined:
    22nd Oct, 2016
    Posts:
    13
    Location:
    Adelaide, SA
    Hi Ross Forrester, Thank you. I have looked at the (s708(1) Corps Act) and it has been quite eye opening for me. However, if say there are over 20 willing investors having raised $2m+, a prospectus will be happily developed and provided.

    We have a pretty safe proven track record but as you had pointed out, it is actually quite difficult for the sophisticated investors to be found.

    I would appreciate your assistance and the opportunity to get in touch to discuss further.
    Thanks.
     
  11. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,112
    Location:
    Adelaide, SA
    Not always @Jess Peletier - CBA property share debt in individual name guarantor for each other, result is debt and rent 50/50 for servicing, but still liable with the guarantee
     
  12. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    5,911
    Location:
    Perth WA
    Exactly. Still liable with the guarantee. It's not just about servicing, it's also about not getting yourself in trouble if something goes pearshaped.

    For servicing there's ways around it but they're limited.
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

    Joined:
    9th Jun, 2006
    Posts:
    26,764
    Location:
    Australia wide
    THere are ways to structure joint ventures where there is only one fall guy, but that will depend on if both incomes are needed for servicing.
     
    Perthguy likes this.
  14. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    11,677
    Location:
    Perth
    Something else I have considered is partitioning land. For example, buy an old house with my mate 50/50, create a new block out the back and divide it up using a deed of partition. The idea is one of us would own the back block to build on and the other would own the front house to renovate. It might even be better to partition after the back house is built so the values are move even. I don't know the details because I have not talked to any professionals yet. The point is that there would be no shared ownership and no shared loans at the end. Definitely not DIY though. I would need a good solicitor and tax accountant to guide me through the process.
     
    Iantheexpert likes this.
  15. Westminster

    Westminster Tigress at Tiger Developments Business Member

    Joined:
    13th Jun, 2015
    Posts:
    7,440
    Location:
    Perth
    I'm not trying to rain on your parade - I have a joint venture project myself - just pointing out as others are below things you need to consider.
    That $80k that you want/need can be quickly eaten up by the items necessary of a joint venture - the architect, legal fees and accountancy fees - to ensure the JV runs smoothly.
    Finance and it's implications on your own servicability, guarantees and risks is a major part.
    I would be talking to a very very good broker and see if you can get around the $80k shortfall you have rather than trying to find an investment partner.
     
  16. Ross Forrester

    Ross Forrester Well-Known Member Business Member

    Joined:
    30th Oct, 2016
    Posts:
    1,807
    Location:
    Perth, Western Australia
    Ian. I have sent you a private message.
     
    Iantheexpert likes this.
  17. Iantheexpert

    Iantheexpert Member

    Joined:
    22nd Oct, 2016
    Posts:
    13
    Location:
    Adelaide, SA
    Thanks everyone for the advice.
    I will involve my financial broker and architect and will do more research on the issues as posted.
    Immediately I get concrete information from them, I will post onto here. Hope it will be useful for those thinking about joint-ventures in the future. Thanks again @Ross Forrester @Westminster @Perthguy @Jess Peletier @Terry_w @thatbum @Brady