Dear Claire, how do I invest in property with partners?
Today on Dear Claire, Heather joins us to talk about buying property with partners
This one’s going be super complex and we might fall down by hole. So we’ll do our best to stay on task. There are many people out there who think about buying a house or investing in property and can’t do it alone. As we all know, with greater numbers you often get more power and leverage. In a market like Portland where the standard housing prices somewhere between $400,000 – 500,000, that’s a lot of money for one person to have to bring to the table. So having somebody (or multiple people) on your side would make a huge difference and increase your buying power.
We have done this exact thing between five of our family members – four siblings and our mother. We all bought a beach house together and it was pretty sweet because we split the down payment. I applied for the loan myself and then we created an LLC (limited liability company). For us greatest thing about it is we all bring something different things to the table. Our brothers bring construction knowledge, mom and Heather did a lot of interior, and I took care of a portion of the transaction/financing logistics and rental bookings. This is totally replicable for others. The biggest thing that people don’t think about is laying out all of the potential issues and planning for the future. A lot of people have a hard time with talking about issues like what if you all die? Who gets the house right? Not pleasant stuff to discuss, but its things that need to be addressed. In addition to that what if you and your partners become horrible enemies at some point. You should discuss this together and have a contract that has a dissolution clause, in case the involved parties need to split up. These are all things that you want to address as you’re moving towards investing with really anyone. We can help with those facilitate those conversations as know what the issues can be, both personal and professional.
Most people are going to have to get a loan for a property. In an instance with two people looking to buy together, the lender will look at both credit scores, and they take the lowest one. For both of the incomes, they take lesser. Debt to income ratio, the worse of the two. And then that based on that, they come up with a third imaginary person, and that third person is the worst. If that that third bad person can qualify, then you’re golden. So keep that in mind when you’re choosing someone to invest with because you do want someone that looks good on paper and can help you or they bring something else to the team. I might not have a down payment, but I have good credit, while the other person has the down payment, etc.
So feel free to reach out with any questions because we can talk for hours about this subject. You can reach us at [email protected] & [email protected] and go on our website www.parisgrouprealty.com and please keep the questions coming. We always love to hear from you. Take care and have a wonderful week.