Investing Using a Joint Venture

Why invest into property?

The performance of residential real estate as an investment is undeniable. It has provided sound and consistent investment returns for many years and is seen by many as the most ‘risk averse’ investment class there is due to:

  • Property is often seen as an ‘easy to understand’ investment as its seen as safe and stable and provides us with a sense of control
  • It provides long term capital gains, it’s always in demand plus someone else is helping to pay it off
  • Well chosen property has continually appreciated in value over the long term as land is in short supply and our population is increasing
  • Property gives us greater leverage (borrowing power) than other investments as banks will often lend up to 95% of its value, and
  • Property will never be worth nothing – its solid bricks and mortar (and land)

Why would I invest using a Joint Venture?

There are two main reasons that people might consider purchasing an investment property under a Joint Venture arrangement. The overwhelming primary reason is that financially people are not able to fund the investment individually by themselves. They might be in a solid financial position with some deposit funds and good employment but in isolation they simply cannot afford to purchase by themselves.

Secondly the prospect of purchasing an investment property by oneself might fall outside the individuals comfort levels. But by combining the financial resources of a couple of individuals they are able to achieve their property aspirations and still feel comfortable in their investment decisions.

Either way by pooling your resources you might be able to invest sooner than investing by oneself and also superior property markets might become available when combining your resources that you wouldn’t be available in isolation due to the combined borrowing power.


Who is best to do a Joint Venture with?

Investing into property can be very rewarding but it is a serious matter. So if you are considering a Joint Venture with someone, we recommend that you invest with someone you know and trust. They don’t have to be your closest friend but someone that shares the same values as you and has similar circumstances to you and / or has your best interests at heart.

Family obviously spring to mind, whether it be siblings investing together or one sibling and their parents but that underlying feeling of trust should be there with family.


What comes first – the property or the finance?

It will come as no surprise that most people start looking at property before having their finances in order but the reality is you need your finances sorted first. I get the fact that there is nothing remotely exciting about the actual Home Loan but if you haven’t had your borrowing capacity tested and Home Loan pre-approved by a lender, then you’re not ‘market ready’. There’s no point in looking at an area if you cant raise the funds, is there?

Once you find a suitable property and reach an agreement on price things happen very quickly and there is little time to then start getting the finance organised from scratch. So put yourself ahead of the game and have your finance sorted first and give yourself the best chance of securing the home of your dreams.

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