3 Things To Consider When Buying Investment Property With Your Family

Let’s face it: investing in property is not easy. On top of being a daunting process, you must do extensive research to ensure that the property you are purchasing will generate a satisfactory return on your investment. 

And, when family and friends decide to get into investing together, things can get … tricky. Financial entanglement in families can cause stress and conflict. But, it doesn’t mean that it cannot be done with correct research. For a smoother investment experience, more information on reliable strategies and expert advice can make a significant difference.

Buying Investment Property Is A Business Arrangement

We all love our families. However, emotional consequences are harder to measure than financial ones. No matter how you decide to approach it—gift, loan, co-ownership—put it in writing. Though loved ones are involved, buying investment property must be treated as a business decision. 

Location, Location, Location 

Too often do people talk about making decisions based on the property itself instead of the location, and that is a huge mistake. If there is one thing you should never sacrifice, it is the location. 

Think about it – an amazing vacation home isn’t going to have much luck if it’s located in a place that people don’t vacation to. 

Moreover, while a rundown property might be a good purchase in a competitive market like London, you might end up at a loss with a rundown property in a less competitive market.

The 1% Rule

When calculating your expected return on a property, it’s a good idea to abide by the 1% rule. The rule states that each month, you should be set to bring in no less than 1% of the price you paid for your property, including both the purchase price and any additional money you put into it, such as repairs or renovations.

Know the Risks

As with all things in real estate, buying an investment property has its risks. It’s imperative that you know what these risks are. Here are some of the most important risks to keep in mind:

• You could end up having to pay for repairs you didn’t initially know about.
• The property taxes in your area could go up.
• Your local market economy could change.

Though you shouldn’t focus on the risks alone, you can’t ignore them either. If something goes wrong, you need to make sure you have some flexibility worked into your finances.

Did I Miss Anything?

Investing in property with family and friends can be tricky, but it can also be one of the most rewarding purchases that you ever make!

What investing experience do you have, and what compelled you to make the decisions you did? Feel free to share your story in the comments below! It’d be a huge help to other families looking to kickstart their investing journey!