Author Topic: How would you make this joint ownership a good investment?  (Read 2161 times)

isaakthepirate

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How would you make this joint ownership a good investment?
« on: February 25, 2016, 05:04:01 PM »
Hi community,

My partner and I are reading to buy her first/my second multi-unit property. We are not married, though we have made a ten-year commitment (yes, we made a fixed contract for our relationship! It's great. We do have an option to renew :)

I have 150K, she has 50K.
I don't need the rental income, she does.

If I invest $150K and she does $50K but we split rental income 50/50, will I just completely screw over my investment returns? Similarly if I contribute 75% of the downpayment but only get 50% ownership, is that just financially stupid?

Trying to figure out how to make this a win/win so I don't kick myself for a low-return investment in the future (recognizing that there are many benefits to this than just financial.)

Resources or recommended reading welcome!

Thank you,

Isaak

CashFlowDiaries

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Re: How would you make this joint ownership a good investment?
« Reply #1 on: February 25, 2016, 05:20:11 PM »
Honestly that just sounds like a horrible idea.  Your risk is much higher then hers and that is a big deal.  There is no way you should be doing a 50/50 split like that.

There are other factors at play as well.  It sounds like you will be financing.  Whose name with the loan be under?   Who will handle property management, vacancies, repairs??

isaakthepirate

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Re: How would you make this joint ownership a good investment?
« Reply #2 on: February 25, 2016, 05:22:21 PM »
Thanks for the input. To answer your question, I'd be getting the loan. Property management, etc. would be split and be able to be shared with some of the vendors I already use for my current property.

ender

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Re: How would you make this joint ownership a good investment?
« Reply #3 on: February 25, 2016, 05:33:14 PM »
If it wasn't your romantic partner, but just a business partner you didn't know, would you do the deal?


CashFlowDiaries

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Re: How would you make this joint ownership a good investment?
« Reply #4 on: February 25, 2016, 06:48:28 PM »
If it was just a business partner, there is no way I would do that deal. 

If I did, it would be like a 90-10 split.   90 for you!  The fact that your name will be on the mortgage even intensifies the risk for you. 

But I get you are in a tough position because you are romantically involved and she wants to invest and you want to help her.  Its a tough decision but i dont think its a smart move to do it.

Crazydude

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Re: How would you make this joint ownership a good investment?
« Reply #5 on: February 25, 2016, 09:00:13 PM »
This is somewhat unrelated, but with this contract, does that mean neither of you can break up with the other? For ten years? What happens if the contract is "breached". I'm just asking cause if this is something that works for you then I don't see why a 50/50 split in a rental property wouldn't work either.

coolistdude

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Re: How would you make this joint ownership a good investment?
« Reply #6 on: February 25, 2016, 09:02:11 PM »
If it was just a business partner, there is no way I would do that deal. 

If I did, it would be like a 90-10 split.   90 for you!  The fact that your name will be on the mortgage even intensifies the risk for you. 

But I get you are in a tough position because you are romantically involved and she wants to invest and you want to help her.  Its a tough decision but i dont think its a smart move to do it.

+1. This isn't something I would do. Mixing business with romance is usually a horrible idea, especially if the commitment doesn't need a divorce to break. I think it's great to want to help, but this does not seem like the right way to go. Imagine the first argument you have over the rental. Do you call all the shots since you put more money in, or since it is 50% do you both have to agree? What if she wants to charge less for rent? What if she doesn't have the money for a repair or expects you to pay 75%? What if she has a deadbeat friend/relative and is okay losing her percentage of rent if she is paying the minority of the expenses?

isaakthepirate

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Re: How would you make this joint ownership a good investment?
« Reply #7 on: February 25, 2016, 09:09:29 PM »
To clarify, we'd live in this property. This is our alternative to buying a single family, picket fence, etc.

We want to buy a home together, but we also want to make money from it.

That said, all comments and suggestions useful, and great questions to consider.

Regarding the agreement: we respect this commitment as a marriage that has a end date. We would end it as seriously as people who care about their wedding vows would end a marriage.

Jakerado

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Re: How would you make this joint ownership a good investment?
« Reply #8 on: February 25, 2016, 09:49:24 PM »
I'd say pick one or the other. Either it's a business venture where you want a good ROI, or it's a split property with your partner.

If it's a split property, don't worry about your ROI, decide on what ownership model you'd be comfortable with and forget about the money.

If it's a business venture, I'd suggest splitting it by amount of money invested, though you can certainly do other splits. Make sure you're both getting a fair salary with a contract signed up front declaring how the assets will be controlled and split in the event of a falling out, exactly like you would with a partnership in a business.

Overseas Stache

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Re: How would you make this joint ownership a good investment?
« Reply #9 on: February 25, 2016, 09:54:13 PM »
I understand most people are advising against it. But if it was me and I was looking to do the the partnership I would structure like this. I would loan your partner 50K at around 4% then you both now have 100K to invest in the property. You both are now 50-50 partners and she just has to repay your loan overtime using the money from rental property. Make sure it is all clearly written in a contract that way you have recourse to continue to collect your 50K loan even if you do end your relationship.