At Purely Finance, we specialise in investment loans for people in the Perth area who want to use property as a vehicle to attain financial independence. We offer a “one stop shopping” service for property investors, with home loans, financial planning and wealth protection products all under one roof.
While we work mostly with sole investors, we occasionally work with people who are partnering up with people who aren’t related to them to buy investment homes. While this is a great way for those who wouldn’t otherwise be able to enter the market to buy an investment home, there are some pitfalls you need to watch out for. Here are a few.
Can You Trust Your Partner to Remain Financially Able to Meet Obligations?
You know how hard it is to keep afloat. If you are entering into an agreement with someone else, you are probably confident in that ability. But are you confident that your partner will be able to do the same? A person’s situation can change in a heartbeat. In addition, they may be overstating their own solvency.
How Much is Your Debt?
If your business partner defaults, you are responsible for the payments. Consequently, lenders look at your debt differently than you do. If you are splitting a $300,000 loan with two other partners, lenders will count it as you owing $300,000. This can make it more difficult for you to obtain financing for other endeavours.
Once you are in the agreement, you can be stuck there. If you want out for another opportunity and your partners don’t want to buy you out or sell the property, you are stuck with your investment.
One of the main perks of having investment property is being able to use the equity you gain to reinvest and make even more money. If you are in a partnership, you can’t do it unless all partners want to.