Buying Property With Friends

5x the individuals means 5x the chance someone defaults and they can't trust four people who went in expecting five to pick up for a deadbeat.

It's not 5x the capital, it's 5x the risk.

But this wouldn't be strictly 'business' as much as it is friends investing together. I already manage my friends money into stocks that we invest in together. It just doesn't seem like a huge jump up from that to me.

Democracy is great and all but will leave people unhappy. If you have 10 guys and 7 like a property, 2 don't and 1 hates it and thinks you're going to be wasting their money you're going to run into issues with those 3.

That is true. I think we'd try to have a pretty large deposit on our first property to mitigate this somewhat.

Good point. I'm hoping that with thorough discussion and prior line-drawing that we could minimize any chances of this. But it is something we've talked about already.

A business IS people investing together. The difference here is in a business the investors consider only profit, not relationships.

Banks make loans based on risk. Unless you are a cash buyer (and God bless you if you find a real estate agent willing to do a five person purchase in fucking cash), you will not get a loan from a bank, your risk is too high and the return is too low. This isn't the era of subprime lending -- five people with individual cash flows, regardless of their potential income outside of this loan are among the subprime-est of subprime.

NOT ONLY THAT, but a fed rate hike is coming this year. That is gonna make banks even more nervous about lending because the cost just jumped up by an actual fucking percentage value of every single loan they make.

Your heart is in the right place, user, but it's seriously easier to just set up some kind of trust fund and let that work for you.

Democracy works in government. Not in business.

Business is like a tribe. It's literally an analogy for war.

A band of warriors has one leader.

I don't actually live in the US so the lending situation here is likely to be different. That being said, I'm still just spit balling and haven't looked into bank policy on this sort of thing yet. I appreciate the insight.

For sure. I think that most of the group would be pretty comfortable with me being the leader, but I know that relationships are a huge factor in whether or not something like this would work.

Wait, what? Your not in the US? Now I'm even more worried about this plan. Be very careful, many countries are in bubble territory like cdn , aus, china, etc.

New Zealand. We certainly have a bubble in Auckland (our largest city), but I'm not looking to buy there. Either way this plan won't be happening for at least another year (if at all) so I will no doubt keep an eye on the climate.

That's a big number, I am gonna start a buss with only one friend
Its gonna be kind of shity when you see that one of the group will slack off and barely do anything, and you start to feel, hmm does this guy even deserve to be in the group?
There is always that one guy, it might be you Faggot :)

Wow, well I hope you don't get fucked. Again, I reiterate, you need to learn a lot more before doing anything

There's two things you should never do with your friends.
1.Have sex with them
2.Anything with money.(i.e sharing rent/bills, loans)

it's not a business, just an investment

You wouldn't have to do much

Of course. I only hatched this plan today really, so there's a lot more to think about.

Does everyone in here just have shit friends or??

Look, it's not about worrying if friends have bad intentions. It's usually about them wanting to but not being able to follow through. Or about legitimate disagreements.

Think about it. Five people. What are the chances that one of them will lose a job at the very time that you need cash from them. It's a risk multiplier.

But this deal checks almost all of the high risk boxes. To be textbook perfect, you just need to add in an adjustable rate low down mortgage, lol.

HAAHAHHAAHHAHAHA

AHAHAHAHAHAHAHAHAHAHAHAHHA
BOY I HOPE YOU GET FUCKED!

It is a business when you have to play landlord. Who is going to fix busted electric outlets and leaky faucets?

My electrician and plumber friends ;)

You're right, but if one person can't make payments for a little while it wouldn't be disastrous for the rest to pick up the difference until they get their shit back together. inb4 never lend friends money, I know, I know. But no risk no reward right :^)

>Is this a stupid idea?

Its a stipid ida to pool the money to pay fown one property faster

This is real estate , proper use of leverage is your friend - the keystone concept is that the tenants are paying the mortgage and the property is also throwing off cash after repair / maintenance etc

You'll be in a much better position with 5 properties making 100 a month than one property that makes 100 a month and then an extra 5 dollars every month as you pay it off

Seriously breakout an excel spreadsheet ,

Also google "bigger pockets" Veeky Forums is a shot place for real estate investment advise

He also should arrange the agreement beforehand so that he is the only one with "making calls" power. You dont want 5 people arguing everytime youre negotiating waste management fees or having to replace a refrigerator

The friends should all be passive investors and the partnership agreement needs to spell out buyout terms / what happens if someone dies etc beforehand

Cheaper to use a lawyer in the beginning than fight with 5 lawyers later

>My electrician and plumber friends ;)

Ok , so who fixes it when they so a half assed "good ol boy" job? Are they licenced and bonded? Because if a bad electric job burns the place down or a shit plumbing job leads to water damage your insurance wont be paying out if you didnt use legitimate contractors

Tbh this. If you can afford it you'd be better off getting more properties. Your debt would be larger but so would your income stream.

Are your electrician and plumber friends in on this investment too? How do they feel about doing more work for the same profit?

So really it comes down to the rent alone paying off a 30 year mortgage, or rent + 5 people's ongoing money paying off a 7-10 year mortgage. Second option provides passive income on a fully paid house faster, by which time more houses have been acquired. At least that's my thinking. Second time bigger pockets has been mentioned, so I'll check it out for sure.

>Are they licenced and bonded?
Well yeah. Besides, unless you're buying absolute pieces of shit, houses don't need continuous plumbing and electric work, so that is negligible in the grand scheme of things, IMO.

>Your debt would be larger but so would your income stream

But with a group, the income would be the same proportionately ( 1/5 income for 1/5 investment) but the debt would be lower because the interest wouldn't accrue for as long. IF the group dynamic can work, this is surely advantageous to doing it alone, no?

>And don't give me any "you can't trust anyone" shit. I don't subscribe to that.

>wants to be a bizness man
>doesn't subscribe to this

wew lad

Many hands make light work familia :^)

I don't get how that applies to my comment

What you are describing is pretty common to see crop up as a huge failure and end up in court.

The reason: for that scheme to work, you need to rely on everyone to chip in equally, which almost never happens. Getting 5 people to provide a consistent income stream into a partnership/LLC is phenomenally difficult, and - like most school projects - one or two people always end up putting a disproportionate amount of effort in.

Other concerns:
- Banks will likely not lend to a bunch of college students to buy a house, full stop.
- Renting requires upkeep, maintenance, insurance, etc. Have you factored that in?
- How do you handle managing the property on an ongoing basis (e.g. collecting rent checks, putting up ads, etc.?) The renter will want one point-of-contact, not five.

That said, if you DO decide to do this, SPEAK TO A LAWYER. You need an airtight LLC/partnership agreement which stipulates, AT MINIMUM, a required amount of money each person has to put in and consequences for not paying in. (Once your friends see that proviso, they'll likely back out, just FYI).

Teamwork makes the dream work.

I still don't get how to applies to trusting or not trusting people, but ok

Well we won't be college students in a couple years which is when we'll all be making our money, so that won't be a factor anymore. But yes, the lending will be a potential hurdle.

The lawyer thing is a definite for me. We want it to be all set in stone so that less shit can happen unexpectedly. We live in a student city, so renting cheaper houses to Uni students would be our first step. That makes finding tenants a bit easier than in other locations most likely. There are many property management companies around here renting to students, so I assume we would operate on a similar basis, in regard to the multiple point of contact thing.

>- Banks will likely not lend to a bunch of college students to buy a house, full stop.

Not just this. Banks don't like to make loans for non-owner occupied properties. If SHTF you guys will just walk away from this mess. Forget about a juicy FHA loan

My chinese bf mom bought an apartment complex in Changsha, China with her sisters and she passively earns 4k a month USD.

Va loans if any veterans. Usda loans. Or since its 5 guys they could just actually put 20% down every time

Gotta get a gook.

Most all government loans require full time owner occupancy. This includes USDA and VA. OP is talking about renting out the houses and hasn't once mentioned living in the house

>user, if you wanna own a home and make rent money on it, just go get a mortgage yourself. They are doing 3% down mortgages now.
This. Find an area where the rental market is crazy but there are plenty of houses for sale, buy them up and rent them out until the market is more stable. It's like that where I live but I don't have access to the credit or the time to manage that many properties.

>no sex with friends
Kissless virgin spotted

Banks don't make as much money on interest when loans are paid off quicker. You are wanting them to take a risk of 5 people potentially defaulting on a loan that will yield little interest.