Questions to Ask Before Buying an Investment Property with Friends

Investing in real estate can be profitable, but you may consider diving in with family or friends to help ease potential economic challenges presented by today’s market. While pooling resources and sharing responsibilities may be a smart move, aligning on objectives before purchasing an investment property together is essential. Here are five key questions to ask before taking the plunge:

1. What Do You Want to Do With the Property?

Clarify your investment goals. Are you planning to buy and hold for long-term appreciation, or is it more about generating rental income? Understanding your shared vision is crucial. Ensure you’re on the same page about any renovations needed to get the best return on investment.  

2. What is the Combined Budget?

Discuss your budget openly. Determine how much each party can comfortably contribute, not just for the purchase but also for ongoing expenses like maintenance, property management, and unexpected repairs.

Before investing, research the potential rental income for the property. Make sure your income expectations align with market realities.

3. What’s Your DIY Skill Level?

Assess the group’s collective skills in property maintenance and repairs. Are any of the buyers skilled in DIY home improvements, or will you rely on professionals for everything?

4. What are the Partnership Terms?

Establish a decision-making process and clear partnership terms. Will decisions be unanimous, or will a majority vote suffice? Having a clear framework for making choices can help prevent disputes.

Clearly define each person’s responsibilities. Who will handle property management, maintenance, rent collection, and finances? Having well-defined roles can help prevent conflicts down the road.

Consider consulting with a legal professional to draft a formal partnership agreement. It should cover everything from property ownership percentages to conflict resolution procedures

5. How Strong is Your Relationship?

Lastly, assess the strength of your friendship. Investing together can put a strain on relationships. Are you confident in navigating challenges and disagreements while preserving your friendship? Ensure you are all on the same page and can manage expectations.  

If you can answer these questions confidently, you may be ready to commit to buying an investment property with friends or family! Keep an eye out for red flags when browsing real estate.