Joint Ventures in Real Estate by Gary Ashton

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Group investment in a property is a growing trend among people who do not individually have the capital to purchase real estate. The benefits can be many, including home ownership, shared expenses and shared equity. However, there are some pitfalls that need to be recognized and addressed before you embark on this venture.
Joint ownership is certainly not a new thing, but it is more commonly seen as a dual investment between a husband and wife or siblings. Multiple people sharing the expenses of a property can greatly defray the individual costs and save more money down the road, especially if one of the parties has some knowledge of maintaining and improving buildings. Also, if one person gets sick or dies or is otherwise unable to make their payment for one pay period, the others are more likely able to take the shortfall. This won't mean that they'll be okay with it, but it will mean that the bank won't foreclose on the house.
Pitfalls with joint ownership usually involve lack of communication between the parties at the time of purchase. No matter how strong the bonds of friendship, family or romantic attachments, it is wise to have everything spelled out in the contract. It helps to get a clear idea of what everybody is looking for in this venture and put down clear guidelines of conduct in the event of a conflict between the owners.
Things to consider before investing with others to buy a property are:
- What are the goals of this purchase?
- What kind of budget is going to be needed?
- What kind of taxes are each of the parties going to be looking at?
- How are the parties going to resolve differences of opinion in regard to how the property is managed?
- How are the parties going to handle repairs/maintenance of the property?
- Is there going to be money set aside for emergencies? Where is it going to be held and how are people going to contribute to it?
- If all parties are living together, are they going to be able to do so amicably? What rules are going to be set out so that this can happen and what consequences will there be for not following them?
- What happens if one of the members loses a job/gets sick and can't make a payment? How will they repay the others?
- What happens if one of the members dies?
Issues that are addressed early stand a good chance of being resolved early, so that differences don't end up splitting up the investors and causing loss of money through mismanagement of the property or legal battles. It would be wise to involve a real estate law professional in your purchase in order to clearly explain to all the buyers what legal and financial ramifications are involved with this kind of purchase and ownership.
A joint purchase of a property can get people a foothold on the real estate market that they wouldn't otherwise have. However, this is not a venture that can be conducted on a whim or without serious discussion on the problems that a group may encounter in the event that things don't go smoothly. With careful planning, budgeting and open communication, though, co-ownership of real estate can bring about significant rewards. It is up to the individual to determine whether this form of ownership is right for them.
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