Purchasing a property is a huge financial commitment which is beyond reach for many people. As property prices keep rising many young people are becoming increasingly frustrated. To get on the property ladder, many are considering crowdfunding opportunities to get access to the property market.
However, there are many limitations buying property through crowdfunding which first time property investors need to be aware of.
Limitations of property investment crowdfunding
- Limited Liquidity: Property crowdfunding investments are generally illiquid, meaning that the investor cannot access their funds quickly or easily. Investors must wait for the property to be sold or refinanced in order to receive a return on their investment.
- Risky Investments: Property crowdfunding investments are generally considered to be high risk investments. Real estate investments are subject to market fluctuations and other risks that can result in a loss of principal.
- Low Returns: Property crowdfunding investments typically offer lower returns than other types of real estate investments. This is due to the higher cost of the crowdfunding platform, as well as the fees associated with real estate transactions.
- Limited Investor Protection: Property crowdfunding investments are not subject to the same regulations and protections as other types of investments. Investors may not be afforded the same protections as they would with a more traditional investment, such as stocks and bonds.
Buying a property with a friend might be a better alternative
Buying an investment property with a friend might be a much better alternative for those who can afford to team up with someone.
For investors thinking about teaming up a friend, having a property sharing agreement is a good idea to document what is agreed. We have put together this post to property sharing agreements to help give you a general idea of what a simple property sharing agreement might look like. To help you have a discussion with a friend, partner, family member or business colleague.
What is a property sharing agreement?
A property sharing agreement is a contract between two or more owners of a property. It sets out each of the partners rights and responsibilities in relation to the property. It is always recommended that partners document their agreement with a property sharing agreements.
What does a property sharing agreement cover?
Each property sharing agreement is different because everyone’s circumstances are different. But property sharing agreements, should cover the following:
- Everyone’s contribution towards the purchase price
- How the running costs for the property are shared
- What happens upon the sale of the property, and how any profit is shared
- Nature of relationship between two or more parties
- What happens if one of the parties is unable to make payments
- What happens in the event of the death of one of the parties
A property sharing agreement will provide comfort for all parties that their rights and obligations are covered while they own the property. They are also a great way to maintain relationships between owners and avoid unnecessary aggravation arising from potential disputes.
Why are property sharing agreements becoming more and more popular?
Property sharing agreements are becoming more and more popular, especially with first home buyers who are unable to buy a property by themselves. For many people buying now with the help of others is a great way to get a foot on the property ladder. People waiting for prices to fall might be disappointed or simply just waiting forever to get on the ladder.
You might be interested to read our article Buying a house with a friend as an investment.
Why Property Sharing Agreements are necessary
When purchasing a property with your friend or partner, seldom would you consider your friendship ending or relationship splitting up. If you don’t have your rights and obligations clearly stated in a property sharing agreement, sharing a property with another person can potentially get very messy.
Individual owners should always obtain independent legal advice before signing such a property sharing agreement.
Are you thinking about investing in a property with a friend?
Private landlords now need to be far savvier about how and where they invest. It is important to have a clear idea of why they are investing and their objectives. We have built Du Val Global to help investors think through the issues which matter when it comes to investing; including:
- Where do we want to buy?
- What kind of home do we want to buy?
- Are we going to live here or rent it out?
- How long are we going to own it for?
- What happens if our situation changes and one of us can’t service the costs?
- What will we do if we go to sell and the prices have fallen?
Du Val Global
We built Du Val Global to help small landlords make better investment decisions. Our platform helps investors with critical decision-making, including:
- Research – real-time market research, allowing landlords to have a complete picture of tenant economics, prevailing rents, and capital values.
- Financial Analysis – investors can create financial models to determine net return after tax and return on investment. Investors can understand specific tax implications and compare investments on an after-tax basis to determine the best investment for them. Investors can even compare properties in different countries.
- Du Val Dynamic Pricing™ – Du Val Global offers a range of properties for sale from leading developers in Australia, New Zealand, and the United Kingdom via its proprietary Du Val Dynamic Pricing™ algorithm. This sophisticated pricing model levels the playing field for small investors through aggregation, providing discounts of between 7.5% and 15% from retail prices, which, until now, have only been available to large institutional investors.
- Portfolio Management – investors can use the Portfolio Management tool to better monitor and track the performance of their investments.
Interested in giving our platform a go? Start your free trial today at www.duvalglobal.com/invest