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Investment Syndicate - pros & cons?

Discussion in 'Real Estate' started by ilori, 20th Jul, 2007.

  1. ilori

    ilori Well-Known Member

    Joined:
    27th May, 2007
    Posts:
    75
    Location:
    Mt Macedon, Vic
    What are the pros & cons of a property investment syndicate vs. just buying property by oneself?

    I recently had someone suggest forming a syndicate (just a simple group of 2 to 4 people) to buy real estate, renovate and hold for long term growth.

    If I have capacity to buy the property in my own right, is there an advantage to doing it via a syndicate with others? Is a synidcate only useful if don't have capacity to buy in own right?

    Other questions come to mind - how do we all access the equity when the property grows? If I organise it all, source the property etc. should I be entitled to some management fee? What would be reasonable?

    Any thoughts on +/- of this type of simple syndicate would be much appreciated.
     
  2. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    Hi Ilori

    Doing a JV with other people can be beneficial or it can be a disaster, based on the stories I've heard. It requires much planning, documenting of common goals/purposes and procedures as well as consideration for getting something formal drawn up in the way of an agreement by a solicitor.

    Be aware that finance can be tricky, as joint and several liability issues are real and can impinge on your future serviceability. I have considered going down this path a few times now and I think you'll find this thread on the topic useful. Good luck in moving forward :)

    http://www.invested.com.au/6/buying-real-estate-others-713/?highlight=joint+liability
     
  3. ilori

    ilori Well-Known Member

    Joined:
    27th May, 2007
    Posts:
    75
    Location:
    Mt Macedon, Vic
    Thankyou very much for the link Jacque - I didn't realise lenders would take whole syndicate loan into account when assessing my personal serviceablity.

    I suppose the point of syndicate would be to get into investments that could not as an individual (whether it's lack of money, skills, time etc.). If able to do it by self maybe that's the better way to go.

    Maybe the general approach should be to buy all can as an individual, then when reaching limit of capacity, consider syndicate to buy a percentage of something more?

    Thanks again for you help :)
     
  4. Simon

    Simon Well-Known Member

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    17th Sep, 2005
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    Location:
    Newcastle
    Maybe you can pool your eforts to research areas but buy seperately.

    Jaques points are very valid, others include trying to reach agreement on different points, what to buy, when to sell, how to resolve problems etc

    I wouldn't do this. If you do want access to something larger then join a property trust!
     
  5. drunkenguru

    drunkenguru Member

    Joined:
    4th May, 2007
    Posts:
    5
    Location:
    Sydney, NSW
    I got asked by a friend on a similar proposal and although everything looked appealing, I decided not to join in purely because I've always been raised to be careful mixing money and friendships. Anyhow, the pact fell apart before anything eventuated due to arguments on responsibilities.

    I just say if you are going to go ahead make sure everything's laid out at the outset

    good luck