Often, friends decide to combine funds for more investing power in real estate. More hands make a task more manageable, especially when putting money towards investments. With the added buying power, you can invest in a better property and more superior area, adding additional value through the long-term equity this helps to build. But first, here are five things you should know about buying real estate in Chicago with your friends.
Naturally, you must be all on the same page in terms of personal finances as well as the driving desire to increase your current cash flow while you build wealth. Should any of your friends that are up for consideration in the partnership hesitate to share their full financial picture with you, this is a red flag, allowing you to move on in search of better-suited partners. Your credit score, debt to income ratio, and the like will all be revealed to the lender to qualify for financing, so it is much better to learn about issues before wasting valuable time. Partnering with the right friend can mean even more profit because borrowers with better credit scores pay less interest. Ultimately, your investments’ goal is to earn passive income during your retirement years, maintaining your independence and lifestyle.
You should know about the right agreements to use when buying real estate in the city of Chicago with your friends. There are two ways you can structure the title of real estate purchased with friends. The first option is a Tenancy in Common, meaning that the partners can be unequal owners, for instance, a 60/40 split, outlined in the title. You maintain the rights to say who will inherit the property when you pass, and you can sell your share in the investment at any time. On the other hand, Joint Tenancy with survivorship rights means that the asset’s ownership is equal, with a 50/50 split, and when one partner passes, full ownership reverts to the other partner.
While the other owners aren’t your landlord, you are not the sole owner and must remember that you will not have everything your way. Resolving disputes is an essential subject to face when entering into any legal contract. It is necessary to preserve friendships that you wish to maintain. Additionally, you should consider economic and other outside forces that could impact the partnership, such as job loss or illnesses. There is also a chance that a partner simply has a change of heart. By discussing the potential for such issues as these in advance and setting out protocol, such as mediation, your investment group can avoid small sparks ever becoming flames. You should all agree in writing to these terms in advance of buying real estate in Chicago with your friends. By taking these steps, you are much more likely to maintain group peace.
Be sure that you cover both ownership and financial responsibilities among the partners. The risks of letting things slide can ultimately lead to severe consequences, especially if a partner doesn’t live up to their end of the deal or becomes stubborn in negotiating the issue. Going into a business venture with friends requires a great deal of forethought and treating the business at hand as just that. To be successful, you must know the pros and cons of buying real estate with your partners.
Knowing who wears what management hat will keep people from stepping on toes from the start. It will help avoid unnecessary misunderstandings, uncollected rent monies, or late mortgage payments. Knowing who will do which job is another thing you should know about buying real estate in Chicago with your friends. You should also have your exit strategy in place at the time of purchase while keeping a careful eye on the market should this timing be changed to gain more significant long-term financial benefit.
If you would prefer to avoid reaching the stage in your investment venture where it has come to salvaging friendships, do not enter into any agreements verbally. Well thought out, and legal contracts are about much more than the business at hand. They are a lifeline to hold meaningful relationships together. Both the benefits and the risks of joint ventures are things you should know thoroughly about buying real estate in the city with your colleagues. Working with an expert who can share their experience and help you avoid these mistakes when creating your partnership can make all the difference.
Stop! Don’t risk costly making mistakes by going at it alone! Working with Global Abundance LLC makes buying real estate in the Chicagoland area easy! Our experts are available right now at Global Abundance LLC to help you proceed with your group investment plans. Ready to learn more about investing with friends? Send us a message or call us at (800) 953-2124 today!