Buying a House with Friends or Family (Joint Ventures)

Buying a House with Friends or Family (Joint Ventures)

Buying a House with Friends or Family (Joint Ventures)The prices of properties in NZ have been going up for quite some time. Housing is becoming unaffordable, making it difficult for common people to invest in real estate. The misery of those planning to invest in property is compounded with lenders tightening their lending procedure. In such a scenario, one method that has caught the imagination of the people is the trend among friends and relatives to pool resources to co-own a property. What does such a joint venture mean and what are the implications for you? Let us find out.

Owning property in a JV is an exciting idea on paper

On paper, it looks a very good concept. People on friendly terms come together to pool money to buy a property. It is really a fascinating idea with people having different skills coming together to jointly own a piece of property. Remember that the motive of this group is to make money. So they renovate the property to improve its value. The group divides the profit made when the property gets sold at a higher value than what it was purchased for.

Think out the possible scenarios

If people are putting in money in different amounts, it is only natural to divide the profits in the ratios of their contributions. But there are many other things to keep in mind before setting up such a Joint venture between friends and relatives.

• For how long is the property going to be held?
• Who looks after the cost of holding the property? (There are inevitable bills as well as minor repairs and renovations)
• What are the costs involved in marketing and selling the property?
• What is the break-even point and what is the price below which property will not be sold?
• Is there any plan in place for the scenario where the property does not sell for the desired asking price?
• How to allow any one of the partners to leave the JV if he so decides?
• What if the project loses money?

These are some of the questions that need to be answered before setting up the Joint Venture for real estate investment. In fact, it is a prudent idea to talk to your solicitor and get relevant advice before buying a property. You do not want to face legal troubles after you have invested your money. It is a good idea to include individuals having some expertise in real estate investment to avoid trouble later on.