Investing in real estate with someone you know, like friends or family, might sound promising. What could probably go wrong if you have known each other for years? If you are about to sign the investment deal you made with your friends or family, take a minute to rethink about it. Real estate investment with someone you know also has a handful of drawbacks that you need to review.
More people, more brain
Though more people also means more help, it also means more time to discuss. No matter how close you are, you will still encounter problems related to differing opinions. This could escalate into a bigger problem on crucial and timely decisions. You might end up losing money and opportunities due to your investment partner.
Time changes everything
Marriages, divorces, financial hardships, job changes, and relocations are some of the things pointed by Investor Junkie that could affect your investment deal. Despite all the possible changes in the future, will you still be able to maintain your partnership?
Drawbacks of real estate investment with friends or family: mistrust and too much reassurance
This is probably the most trivial yet dangerous point to note. People usually pass on signing partnership agreements solely because they believe in the strong bond they have. Most of them also proceed with the investment deal without consulting in an attorney beforehand. Big no. No matter how strong your bond is, you never know how they can change once money is involved. Money, most of the time, could show you the worst side of the nicest people. Write your partnership agreements and consult it with your attorney before you start regretting it.
Complicating relationship
Let’s think about the worst case that could happen: your investment flops and you need to cover the loss. Will you be able to discuss it with a cold head with your partner? Will you still be able to maintain your relationship, not only as investment partners but also as friends and even a family? Or, will you be able to end whatever relationship you have with them?
First-time homebuyer benefits
While the benefits might differ from one country and another, it is worth to note. For example, Investor Junkie mentioned that first-time homebuyers are offered with one-time opportunity to save recordation taxes. When you purchase a property with your friend or family and both of you are first-time homebuyers, you will use up the chance at once. Before you decide on an investment deal, do your research on related advantages given to property owners. Who knows, you might end up losing a once in a lifetime chance for the deal.
Read also: Benefits of Starting Real Estate With Friends or Family
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