# Investing in properties with a small group



## Montrealer (Sep 13, 2010)

How are you all?

I work full time (IT Consulting) and am a Real Estate Broker on the side, my real estate business is priority to I pick my own hours on the consulting side. 

I wanted to know if anyone here has or currently does invest in properties with a small group of investors, friends or even family?

I am interested in created a group of 4 to 6 individuals (to start) and investing in mulitplexes in the Greater Montreal area(s) and wanted feedback from the experiences of others.

Thank you!


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## I'm Howard (Oct 13, 2010)

I would suggest thay you raise the funds yourself and invest over time, but if you want to participate in R.E with a group, buy REIT'S, much easier to buy and sell and you will probably get a better cash flow.

I was thinking along the same lines, only I was going to get recreational properties in the Blue Mountains, I could easily raise dollars of Family monies, but the more I thought of it, the more problems I could see.

Group Investing is like a bunch of people in a row boat, they all will not want to row at the same pace or direction at the same time.

Good Luck, or should I say, Bonne Chance??


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## Dana (Nov 17, 2009)

We have never invested as part of a syndicate. We have been approached by friends, family and acquaintances who were interested in investing with us. My experience is that they are looking for passive income/returns. Real estate is not passive. In fact it is quite active. Often it is a full time job. It is also my experience that newbie real estate investors seem to have unrealistic expectations of what their returns should be. 

Add to that the fact that we have an investment/management style that we like and are comfortable with and have no interest in explaining to, consulting with or justifying our decisions to anyone else. 

If we were to consider investing as part of a syndicate, it would have to be a formal arrangement with contracts drawn up by and looked over by lawyers. Each party would require independent legal advice and this would make the venture quite expensive. For example, how do you deal with one party who needs out of the arrangement? What if one share is drawn into a marital breakdown, creditor claim or lawsuit?

Too many variables.


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## Cal (Jun 17, 2009)

I would never invest with others. I don't understand why I could be on the hook for all of the risk (potentially) while only getting a share of the profits.

Doesn't make sense to me.


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## marina628 (Dec 14, 2010)

Many people fail to understand the issues that can come up when investing with others.You may have different ideas on how much if any extra mortgage payments you will make.Do you feel comfortable going to a bank and getting a mortgage with 5or six people?What if one of the group gets in a bind and needs the money?What if one of the owners goes out driving drunk ,kills somebody then gets sued and this JV gets tangled in a sticky web ?Just a few reasons NOT to do it off top of my head 

Marina


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## the-royal-mail (Dec 11, 2009)

It is a tremendous risk, because if any one of those people defaults, changes their account, moves away or otherwise stops paying then you basically start carrying them and become tasked with chasing after them. People lose interest in these things and are often pumped up and enthusiastic at first, like the OP often seems to be when they post here. Then when reality hits and they do the math it's not such a great idea after all. Life is too short.


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## Berubeland (Sep 6, 2009)

As Dana mentioned, real estate is not passive and the problem as I see it is that the person who would actually do the work needs to get paid. 

In typical joint ventures on single family homes the investor puts up all the money and the managing partner gets 50% of the cash flow and the appreciation. 

You can have up to 12 people within a limited liability corporation putting money in. 

Personally I've always been willing to do this kind of deal, but the first question other investors invariably ask is how much money are you putting in? If I had the money I'd hardly need investors right? If you don't have the money you're scarcely a great investor if you claim that you're successful. So this is the heart of the problem.


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## Montrealer (Sep 13, 2010)

I guess all the advice is negative on investing with others.

I have heard of people doing this though, even with multi-million dollar properties all over Canada, I have a family member who invested $2,000,000.00 with several other partners in a $15,000,000.00 building.

Is there any chance that it works as long as the group are friends and know one another, get along, etc?


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## Four Pillars (Apr 5, 2009)

Montrealer said:


> Is there any chance that it works as long as the group are friends and know one another, get along, etc?


There's always a chance. 

I think the issues mentioned in the thread so far are all excellent. That said, if this is a business model which you can see working for you - don't let us stop you.

You should try to find other people who have done deals like this to get their input on how to run things. Agreements, types of partners etc.


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## LondonHomes (Dec 29, 2010)

Montrealer said:


> II have heard of people doing this though, even with multi-million dollar properties all over Canada, I have a family member who invested $2,000,000.00 with several other partners in a $15,000,000.00 building.


I would think if you can afford to buy a 15 million dollar building you probably have a lot of lawyers involved upfront to draw up the partnership agreement and most likely are paying somebody to manage that investment for you.

Probably not feasible on a smaller scale.


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## andrewf (Mar 1, 2010)

The thing about mixing money and friendship is that you often lose both!


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## the-royal-mail (Dec 11, 2009)

Montrealer, are you soliciting business?

That's what it says in your 1st post.


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## iherald (Apr 18, 2009)

I'm potentially doing this right now. 4 investors, we'd each put in 1/4 of the share of a property we'd buy. The money would go into a corporation, and each person would get 1 share.

People are right about what to do if one person needs the money immediately. The people in this group are all income professionals, and we've all agreed not to expect any money for the first five years. 

The reason we are doing it this way is to lower our individual risk. The company will own the house outright, and through the corporate structure we're only risking what's in the company.

Will it work out? I don't know. We are being careful on who we are approaching on investing. We looked for people with cash, with a reasonable business sense, calm and an understanding that this is capitalism and we could lose everything. 

I figured I'd put the opposite side out there.


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## marina628 (Dec 14, 2010)

iherald I would say if the 4 of you paid cash for the house then you should do ok.The partnerships that wont work are when there are mortgages and people are scraping together their last dollar just to get in a deal.My husband and I did one deal with a friend ,he was a carpenter and did not have equal share of cash but we knew his skills were equally as valuable.He lived in house a year rent free while he renovated the property.We both made $75,000 profit and it gave him the money to buy his own house ,my husband shared the work load with him as my husband is licensed electrician and also have HVAC papers.They really enjoyed working on this together and while the house was being done our friend had to live with us for 6 months rent free until it was in a state he could live there.This house had to be gutted and done from top to bottom and we also built an addition on to the house as well.It took about 2 months with planning approval and inspectors but there were 4 big bins of garbage to remove and other stuff to be done so overall it went great.


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## iherald (Apr 18, 2009)

My thought is that you don't go into business with your friends because they are your friends, and you don't plan on being friends with your partners. But, if you've got the right mix of people, it can work out. 

But, the points raised are valid. We can all agree right now that the rent stays in the company. In three years someone may have a kid and may want to get their share of the rent. That's always the risk. 

But, if you go in with your eyes open and you have faith in each others abilities and personalities, you're set. 

Of course, ask me in five years when the house has burned down, three partners are divorced and inflation is 600% and I may have a different opinion.


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## Taxsaver (Jun 7, 2009)

I'm Howard said:


> I would suggest thay you raise the funds yourself and invest over time, but if you want to participate in R.E with a group, buy REIT'S, much easier to buy and sell and you will probably get a better cash flow.
> 
> I was thinking along the same lines, only I was going to get recreational properties in the Blue Mountains, I could easily raise dollars of Family monies, but the more I thought of it, the more problems I could see.
> 
> ...


The funniest person of this board!


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## Cal (Jun 17, 2009)

http://www.theglobeandmail.com/glob...k-twice-about-joint-ownership/article2018784/


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## Cary (May 9, 2011)

Hi,
I don't understand, why I could be on the hook for all of the risk (potentially) while only getting a share of the profits.


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