4 Ways to Make Co-Owning an Investment Property a Positive Experience
Are you considering investing in real estate but can’t really afford it on your own? While co-owning a property with a partner might not be your first choice, it can help make your dreams of becoming a real estate investor a reality in a shorter time span. In some ways co-owning can be great, you have someone to share all the responsibilities and costs. Not only that, but people who invest in real estate with partners tend to purchase additional investment properties at a faster rate than those working alone. This means that they have the potential to make more money over a shorter time frame.
Regardless of whether you go in alone or with a partner investing in rental properties always requires quite a bit of planning. Here are a few ways to help ensure success in your business, and keep your relationship intact, make sure you’ve covered all the bases.
Breakdown the Many Obligations That Come with Investment Properties
When it comes to investment properties, landlords have a multitude of obligations: tenant management, financials, general repairs, maintenance are just a few of the many things you are responsible for. While these things do not have to take up a ton of time, it is essential to know who will be taking care of each aspect. A lot of real estate professionals suggest making a detailed list and then determining which investor is responsible for each. For example, one partner might deal with any and all tenant inquiries, while the other partner deals with general maintenance issues. It is crucial that you make these decisions early in the relationship. This will ensure that you are both wholly aligned before you take on any tenants.
Be Mindful of One Another’s Time
Investment properties require a lot of work and come with a lot of commitments. In addition to all the financial obligations that are involved, it is essential that you discuss the time commitments and how much each of you is willing to put into the property. If neither of you has much extra time available to deal with the primary day-to-day responsibilities of tenant management and maintenance, you might want to consider working with a property manager.
Open a Joint Bank Account
Perhaps the best way to keep the finances organized, consider opening a joint chequing account that you and any partners have access to. This will allow you to see what each other is putting in or taking out. It also allows you and your partner to avoid any kind of messiness with personal accounts. A joint bank account is the best way to keep everyone organized and accountable.
Get It In Writing
Regardless of what kind of relationship you have with your partner, it is critical that you take the time to create a joint venture agreement. It is essential that it clearly details all of the rules and responsibilities. There are no set rules about what should be in it, but it is a good idea that you write out things like the financial contributions each of you will make, as well as how profits (and losses) will be organized and shared. Other things that you might consider adding include how the decision-making process will go as well as the details of the day-to-day management, and an exit strategy. Your exit strategy should include termination conditions, should one of you decide you want out of the partnership.