Should you buy a property with friends or family?

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Various cultures in Australia have been buying property as a group for generations. Mostly because of the buying power and the ability to buy property out of most peoples reach, such as development sites and over the years of holding property, these developments sites can become quite valuable.

It is difficult however to put together groups to buy property as from my personal experience, having done this in the past, everyone within the group is often in a different place at the same time both financially and personally. Buying as a group does have its advantages and if this is the line being considered legal and taxation advice is paramount. Other considerations will include the following;

  • Creating a Legal Entity and Structure approval
  • Agreement on the type of property to be purchased
  • Creating a centralized fund for income and outgoings
  • Arranging regular gatherings for updates, discussion and decisions.

Another point is for all to reach an agreement on the minimum time frame to hold property. Most of this along with details on how to withdraw from the investment should find its way into the agreement prepared by a specialist Lawyer. All sounds like fun but often in the various cultures mentioned, extraordinarily little of the above is undertaken and with strong family ties and single leadership it has worked – but not always recommended.

Personally, I decided a long time ago that partnership and group buying may seem the simplest way to go however if I am ever asked for advice, I will often recommend against it. In my view, purchasing Real Estate as an investment is not only a personal purchase but an expensive purchase and as such I would want to be in control of my own destiny when it comes to such a huge outlay. I know in many cases it seems impossible to get into the market on your own but at least you make the decisions on what happens once you are in and in the long run, where so much can change, this is the best position to be in.

There are many marketplaces in Australia that can allow for a first timer to get into the market, but this does not necessarily mean that capital growth will follow, and rental return and capital growth must be balanced when considering a purchase. Too many times people have opted for rental return only to find themselves with a positive cash flow followed by a tax problem and little if any, capital growth and capital growth is what is needed to move onto your next investment.

At the time of writing this article I can still identify Capital Cities where rental return and capital growth can still be attained along with affordable entry points into the marketplace. Perth, Brisbane and Adelaide are still affordable Cities with the potential of upside in capital growth and low in vacancy rates meaning that the entry level buyer still has a chance to not only get into the marketplace but to do so in Capital Cities where the potential for good rent and capital growth still exists.

Regional areas also offer opportunities as with COVID19 appearing over a year ago, many of the regional areas have found themselves being inundated by city dwellers who have worked out that they don’t need to be in an office every day to maintain their careers and this has had the effect of underpinning price growth but at the same time have a strong level of affordability.

 

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.

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