We’ve all heard the saying about “too many cooks in the kitchen.” When you don’t have the right process, buying property with multiple owners can feel a lot like this.
Imagine a scenario: You have found the perfect investment property. By pooling capital with a few friends, you have the cash you need to buy it. But just like any investment, the decision to buy isn’t the only decision you need to make.
You and your partners start clashing on all the decisions. One wants to flip and sell, one just wants to use it as a short-term rental, and the other wants to rent it out to a family long-term. Before long, you all feel like Bugs Bunny and Daffy Duck fighting over whether it’s rabbit season or duck season: Stuck in a circular argument that’s going nowhere.
It doesn’t have to be this way. Investing in property with friends should be fun and rewarding, not tear-your-hair-out frustrating.
Follow our seven steps and you’ll know all the essentials for how to buy property with multiple owners. Let’s get started!
How to Buy Property with Multiple Owners: Benefits of Group Real Estate Investing
Before we lay out our guide to buying property with multiple owners, let’s first ask an important question: Why would you want to buy property with multiple owners? What are the benefits of this type of investment?
You may choose to buy a house with a friend for several reasons. First and foremost, by purchasing property as a group, you’ll have access to more capital than you would be able to spend investing solo. As a group, you may be able to access higher-value properties than you could access on your own.
Even if you have the capital to invest in your dream property alone, investing as a group can help you spread your investment risk and diversify your investment portfolio. Instead of spending all your investable capital on a single property, you may be able to purchase multiple properties with your group, spreading your risk and giving you the opportunity for even greater returns.
But there are more benefits to group investing than just the ability to pool your funds.
Another benefit of investing as a group is that you have access to the entire group’s brain trust. Instead of relying on only your own experience and knowledge about real estate investing, you can make decisions with confidence knowing you’re leveraging the alternative investment know-how of your entire investing group.
Buying property with multiple owners can also help you build wealth and level up with your friends or family members. You can learn the ropes of real estate investing together, strengthening your personal relationships and earning returns on your investments simultaneously.
At Tribevest, we know that buying property in groups has been a wealth-building secret of the rich for centuries. We’re spreading the love so that everyone can do the same without damaging their personal relationships. Let’s take a look at our seven foolproof steps to buy property with multiple owners—without going gray with stress.
1. Find Your Group
Before buying property with a group you’ll need to find your group. You may already have group members in mind: Maybe you have a group of friends who have always dreamed of investing in property together, or you’re like me and you’re looking to team up with your siblings to buy a vacation home.
Related Read: The Beginner’s Guide to Group Investing
If you don’t already have your group in mind, don’t worry, you’ll likely be able to find the perfect investing partners in your social circle. Look for people in your life or in your online communities who are serious about building wealth and who have the capital necessary to participate in an investment like real estate.
Investing with friends or family members can feel intimidating, but with the help of Tribevest’s alignment tools, group investing is easy, fun, and rewarding. We’ll help you protect your relationships and your investments at the same time.
2. Establish Your Mission
At its core, your investment group is a business. Every great business has a mission statement: If you want your investment group to succeed, you need to have one.
A mission statement might feel like a silly formality, but it’s so much more than that. Your mission statement is the foundation of your group: A touchstone you can use to align your group and ensure that all members are on the same page throughout your property investment journey together.
Establishing your mission early in the process allows you to smoke out potential conflicts or issues between group members before you’re in too deep. If your group isn’t on the same page, it’s better to know early on when you can resolve it easily, or allow members who aren’t on board to exit the opportunity before any cash-pooling occurs.
3. Create an Operating Agreement
As we mentioned in point two, buying property with multiple owners is a business opportunity—you need to take steps to treat it like one. While your mission statement is a great way to ensure all group members are aligned as to the purpose of your group, it’s not enough to set your investment off on the right foot on its own.
Your operating agreement will serve as a roadmap for all your group’s operations. You’ll use this document to lay out your investment plan, voting procedures, bylaws, and more. In short, this contractual document aligns all members of your group on rules and procedures, paving the way for smooth sailing down the line.
Another benefit of creating an operating agreement is that it clarifies expectations for all group members. By laying out these expectations in writing from the get-go, you avoid difficult conversations later on. If you live in California, Missouri, Delaware, or New York, an operating agreement is actually required by law to proceed with forming an investment group.
4. File Your LLC
With your mission statement and operating agreement in hand, you’re ready to set up your formal business entity! Formalizing your group by filing an LLC helps reduce conflict among group members. This process reduces conflict because no single group member “owns” the property in question: It is owned by your joint business entity, making everyone an equal partner in the investment.
You may also want to open a business bank account at this point. Having a business bank account helps you to separate personal finances from the group’s investable capital. Additionally, this step prevents any one group member from holding the entire group’s capital at any time.
These steps can feel overwhelming, but if you choose to use Tribevest’s group investing platform to buy property with multiple owners, we’ll file your LLC for youso you can focus on building wealth.
5. Find Your Property
With all the building blocks of your investment group in place, you’re finally ready to get started with your property investment!
You may have come to the table with your dream property already lined up. If not, you’ll want to start researching properties at this time. Take this opportunity to realign your group. You’ll need to ensure all group members are on the same page about the commitment you’re about to make, both in terms of time and money.
Ensure everyone agrees on a price point for your property and the level of work they’re willing to do to get the property ready for rental or resale. Do you want to flip this property together, or do you want a more turnkey solution? How hands-on will you manage the property, if you’re intending to rent it out? These are questions you’ll need to establish answers to at this time.
Additionally, you may want to work with a real estate agent during this process, and you’ll want to consider any inspection results before making a purchase.
6. Pool Your Capital
You can pool your capital once you have your property lined up—and you know the price tag. This can be a bit awkward, especially if you’re investing with friends or family members. Using a tool like Tribevest to send automated fund contribution reminders to all group members can help you avoid feeling like a collections officer.
After everyone has contributed their capital, it’s time to pull the trigger! Purchase your dream property. Once you’ve completed your purchase, you’re free to carry out the plans in your mission statement and operating agreement.
Maybe you want to use the property as a joint vacation home or maybe you’re planning to list it on Airbnb as a short-term rental. Perhaps you’re looking to flip the property for a profit. Whatever you choose to do, you’re now ready to start reaping the rewards of your joint investment.
The last step of buying property with multiple owners is… do it again!
You’ve successfully bought one investment property as a group. You’ve taken the time to set up an LLC and a business bank account. You’re learning the ropes of real estate investing with a group of friends or family members: Why not keep a good thing going?
Revisit your mission statement and see whether your group is a “one and done” investment group just looking to go in together on a single property, or whether you’d like to continue investing together in the future.
Whatever option you choose, Tribevest is here to help align your group and make sure the process goes as smoothly as possible.
How to Buy Property with Multiple Owners: Level Up Together
Buying property with multiple owners is only a headache if you don’t take the proper steps upfront. By preparing yourself and your group for success from day one, you’ll be able to sail through your group investment process!
One last tip for the road: Alignment doesn’t stop after you’ve closed on your property together. Ensure you’re taking steps to manage your group, keeping lines of communication open, and keeping tabs on changes to legal and tax requirements that may impact your group.
Need help managing all the pieces of the puzzle? That’s what Tribevest is here for! Our group investing platform gives you all the tools and features you need to buy property with multiple owners. Using our tool, you can manage your group, pool your capital, maintain open communication, and vote on key decisions. We’ll even file your LLC for you, taking one headache off your plate altogether!
Interested to see how Tribevest can help you get your dreams of group property ownership off the ground? Start your Tribe for free today!