5 Keys to Buying Rental Property with Friends

Buying rental property with your friends is a business deal and, as with any business deal, there are issues that should be considered before taking that step. Below are 5 keys to buying rental property with friends.

images (1)1. Be sure that your friends can be relied on. Entering into a partnership with friends who are not dependable or do not follow through with promises may not be your best choice for purchasing a rental home with.

2. Discuss how much you can collectively afford to spend on a rental property and what each friend’s contribution will be. You should also decide how you will hold ownership of the rental property. Generally, when friends buy property together, they hold ownership by tenancy in common. This means that each owner has an equal right to the property and can sell his interest without the other owner’s approval. Any number of individuals may own different percentages in one piece of property under this type of ownership. For example, you own 25 percent, a friend owns 25 percent and another friend owns 50 percent. Generally, the percentage of ownership is decided by how much each person has invested to purchase the property.

3. Create a written partnership agreement outlining the details of ownership and how future transfers of ownership will be handled. For example, if one friend decides to sell, the other partners have the first right of refusal. The agreement should also spell out the financial obligations of each friend and what will happen if one friend stops meeting his financial obligations. Other details to consider include who will be responsible for ensuring rent is collected and that the mortgage, insurance, taxes and maintenance are paid for? Who will be responsible for maintenance and repairs? It would also be wise to include a procedure for resolving disputes. For example, by unanimous vote or by a majority of the vote.

4. Consider forming a limited liability company, LLC. Purchasing rental property as an entity rather than an individual can help protect the owner’s personal assets. Each friend will become a shareholder, but you will not be personally liable in the event that the owners, you and your friends, of the rental property are sued. LLCs have the ability under law to conduct business including purchasing, owning and conveying real estate, the power to make contracts, and to borrow money when necessary.

5. Make sure the rental home is a good investment. An LGBT real estate agent will know and can help you find an investment property and assist you with the purchasing procedure.

The advice contained in this article is for informational purposes only. It would be wise to seek the advice of a real estate attorney to assist you with the legal aspects of buying rental property with friends.

Buying a Rental? Gay Realtors Advise Hiring a Property Manager

One of the main challenges affecting new investors nowadays is actuality maintaining the property. Before buying an investment property you might want to consider whether or not you have the time and ability to be a “hands on landlord.” Handling the management of your investment property personally might sound like a good idea but it is actually a venture that takes a lot of time and effort and in fact many new investors realize quite quickly that dealing with tenants and maintaining properties is actually a full time job.

RentalWe’ve heard lots of stories from new landlords about how their lack of expertise has cost them in the end. Being a landlord requires knowledge of your legal responsibilities and includes the expedient and lawful handling of repairs and maintenance, the preparing of leases and dealing with local government and safety authorities. If you handle the paperwork badly it can prove to be very expensive for you in the long run. A legal loophole could allow a tenant to escape without paying rent and you could even be sued by a tenant for violating the agreement by not making necessary repairs or even neglecting to do something as simple as giving the tenant proper notice before you enter the apartment.

This is why so many property owners opt to hire a property manager to take care of the daily operations of running their properties such as showing the property to potential tenants and getting leases and disclosures signed and hiring the proper repair people to fix up the property. Property managers are also responsible for the day to day upkeep of the property and making sure that tenants do not abuse their privileges as residents. Many property managers also act as peacekeepers between neighbors that do not get along.

Most property managers / property management firms charge a fee from their services that amounts to being about 7% of the rent. However, the fees that you can pay for a good property manager can really vary. For instance well-trained managers from an agency that have a lot of legal knowledge and that can guarantee their service with an equally good back-up manager can be more expensive to retain.

Of course we advise checking the references of any candidate / company for hire and also inquiring as to how many other properties the individual is managing at the same time.  A property manager that is handling too many properties at once may be stretched too thin to do a good job of maintaining yours.

A great property manager must be willing to do property inspections of tenant units at least every six months. It is also the job of a property manager to try and collect late rent from delinquent tenants and evict them if they do not pay the rent. It is recommended that you hire a professional property manager that has a bit of a hard nose and does not humor the late-paying tenant or you may never see the income from you unit which of course  is no way to get rich.

Author Jeff Hammerberg is the Founding CEO of GayRealEstate.com. Free Instant Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast to Coast. FREE Buyers Representation ~ Free Relocation Kit to any City, USA ~ Free Sellers Market Analysis for home sellers.