First JV Deal with friends - case study

[princecharles]

Hi everyone I`d like to ask for advice as I have no idea what to do

Here are the embarassing details:

I live in Hamilton with my gf who is paying the rent at the moment as I am starting a new business. I have two friends. One lives in Toronto and works at RBC. The other lives in San Francisco working as a nurse.

My friend in Toronto has been renting there for 4 years paying around $1200 monthly. I keep telling him he needs to buy but he doesn`t know how and doesn`t want to learn.

I want to buy a property for him to live in and pay rent. I cannot afford to buy the house myself as I can only put down 5k, and I have no income YET so a mortgage would be doubtful. Although, my mother would be willing to cosign a mortgage for me because she knows my friend in Toronto well.

So here it is:
Me - can spend 5k, and get my mother to cosign if necessary
Toronto friend - can spend 5k, and could get a mortgage as he has a good job
San Fran friend - willing to put in 10k if it is a viable investment, since he knows and trusts my toronto friend as well.

Is there ay way we can live happily ever after? I am thinking of buying a cashflowing 300k house around toronto (15k down, and 5k for closing), where my toronto friend lives in and property manages, but am not sure how we would arrange the mortgage OR the cashflow income between the 3 of us. I`m lost can anyone help or direct me to help? I`m not sure if this is too messy to ever happen, or does this stuff happen all the time? I would hate to see him spend another 15k in rent this year..

Thanks

 

[Nir]

Unfortunately, you are not ready for that.. yet, AND it would not make sense even if you were!
what would your benefit be? there is almost no cash flow in Toronto!
Also, I strongly recommend you buy one or 2 properties yourself first, then involve others. don`t involve others in your first deal.
how can you prepare them for something from which you will learn a lot yourself. too early plus deal too complicated.
At this point involving a nurse from san fran should only be done if OHIP does not cover something. and we know their health system ####s.
Good luck.

 

[housedoc]

Dream on!
300K for a multi unit property in Toronto?
Stop worrying about your friend and look at something in Hamilton.....and hope your gf doesn`t dump you!

 

[invst4profit]

Good advice above.
Also you NEVER want a friend as a tenant.

You appear to want to help a friend as a partial motivation to get into the business. Unfortunately social workers do not make money.
Right now you can not afford the cost of a mortgage so trust me when I say you can never afford the cost of emotions when it comes to investing.

Money and emotions never mix.

 

[TodorYordanov]

This is not a case study!

Find a property and start working with some real numbers. Only than will you see what is possible and what is out of reach.
I.E. your friend pays $1200 now, but why assume that he will be paying $1200 in your property. Will his accommodation be the same, worse, better?
You need to build your case on solid ground. Property and finances.
We can all give you more constructive advice if you present a deal with facts.

 

[housingrental]

princecharles - There is no good way to look at this. You shouldn`t be buying a property. Risking damaging your relationship with your friends and family, losing what little money you have, and bankruptcy aren`t worth the potential little $$ you might gain if all the stars align. You should save your money and your mother`s goodwill on co-signing for when you have a stable income and want to buy your own place to live in.

 

[EdRenkema]

What are you looking at this dream for??You already have it made, you have a gf, she is paying the rent !!!
You also have the time to work on your business, it really can`t get much better.
You`re looking at RE with rose coloured glasses. The earlier responses are 100% correct, you need to look at numbers, Hamilton is one of the best opportunities available. Give your friend your opinion and leave him alone or you will have a falling out (ask me how I know this).
BTW if you think it is so important for your friend to own instead of rent then why are you doing the same thing???

 

[princecharles]

QUOTE (investmart @ Nov 30 2009, 10:24 PM) Unfortunately, you are not ready for that.. yet, AND it would not make sense even if you were!
what would your benefit be? there is almost no cash flow in Toronto!
Also, I strongly recommend you buy one or 2 properties yourself first, then involve others. don`t involve others in your first deal.
how can you prepare them for something from which you will learn a lot yourself. too early plus deal too complicated.
At this point involving a nurse from san fran should only be done if OHIP does not cover something. and we know their health system ####s.
Good luck.

thanks

on the technical side i am ready to invest. but yes not financially.

there definitely is cash flow in toronto houses.

deal is complicated, yes i know, i was just checking if anyone might have an idea i wasnt considering.

haha nurse from san fran.

 

[princecharles]

QUOTE (housedoc @ Dec 1 2009, 07:47 AM) Dream on!
300K for a multi unit property in Toronto?
Stop worrying about your friend and look at something in Hamilton.....and hope your gf doesn`t dump you!

thanks

sophisticated thought there.

 

[princecharles]

QUOTE (invst4profit @ Dec 1 2009, 09:00 AM) Good advice above.
Also you NEVER want a friend as a tenant.

You appear to want to help a friend as a partial motivation to get into the business. Unfortunately social workers do not make money.
Right now you can not afford the cost of a mortgage so trust me when I say you can never afford the cost of emotions when it comes to investing.

Money and emotions never mix.

thanks

i see your point. but i thought a good friend would be an ideal tenant. i know he is a good tenant and has a solid job. i understand there might be a conflict of interest, but a contract is a contract no? why not?

 

[princecharles]

QUOTE (TodorYordanov @ Dec 1 2009, 09:17 AM) This is not a case study!

Find a property and start working with some real numbers. Only than will you see what is possible and what is out of reach.
I.E. your friend pays $1200 now, but why assume that he will be paying $1200 in your property. Will his accommodation be the same, worse, better?
You need to build your case on solid ground. Property and finances.
We can all give you more constructive advice if you present a deal with facts.

thanks

i have the numbers i just didn`t share them as that is not the part i`m concerned about. it`s the arrangement and mortgage. but you`re right that prob would have helped.

the accommodation would be better. and the plan was that he would move out when he wanted to buy and would remain the property manager.

 

[princecharles]

QUOTE (housingrental @ Dec 1 2009, 10:22 AM) princecharles - There is no good way to look at this. You shouldn`t be buying a property. Risking damaging your relationship with your friends and family, losing what little money you have, and bankruptcy aren`t worth the potential little $ you might gain if all the stars align. You should save your money and your mother`s goodwill on co-signing for when you have a stable income and want to buy your own place to live in.

thanks

you`re right it is complicated. not as much risky, but i havnt provided the info to help you see that part.

sheesh i have always heard that in order to get your first deals together you should ask your friends and family help first. looks like that is no longer the golden rule, at least here.

 

[princecharles]

QUOTE (EdRenkema @ Dec 1 2009, 11:24 AM) What are you looking at this dream for??You already have it made, you have a gf, she is paying the rent !!!You also have the time to work on your business, it really can`t get much better.
You`re looking at RE with rose coloured glasses. The earlier responses are 100% correct, you need to look at numbers, Hamilton is one of the best opportunities available. Give your friend your opinion and leave him alone or you will have a falling out (ask me how I know this).
BTW if you think it is so important for your friend to own instead of rent then why are you doing the same thing???

thanks

yes i am currently set up alright. she is an investor in my business with equity, and she pays the mortgage on her house. it`s a perfectly reasonable exchange on both sides.

how do you know this - i would be curious to hear

i am not doing the same thing, clearly.

 

[housingrental]

Hi princecharles, I`m not sure if you misread my original post but using your mother to help you can be a great idea... but you need to be in a position to ensure that she`ll be taken care of... If you don`t have stable income, and your friend defaults, how are you going to cover payments ? Do you really want to set yourself up in this situation?

QUOTE (princecharles @ Dec 1 2009, 11:50 AM) thanks

you`re right it is complicated. not as much risky, but i havnt provided the info to help you see that part.

sheesh i have always heard that in order to get your first deals together you should ask your friends and family help first. looks like that is no longer the golden rule, at least here.

 

[housingrental]

Awesome postQUOTE (EdRenkema @ Dec 1 2009, 11:24 AM) What are you looking at this dream for??
You already have it made, you have a gf, she is paying the rent !!!
You also have the time to work on your business, it really can`t get much better.
You`re looking at RE with rose coloured glasses. The earlier responses are 100% correct, you need to look at numbers, Hamilton is one of the best opportunities available. Give your friend your opinion and leave him alone or you will have a falling out (ask me how I know this).
BTW if you think it is so important for your friend to own instead of rent then why are you doing the same thing???

 

[invst4profit]

QUOTE (prince charles @ Dec 1 2009, 11:50 AM) thanks


sheesh i have always heard that in order to get your first deals together you should ask your friends and family help first. looks like that is no longer the golden rule, at least here.


Asking friends and family for help is still a good starting point but emotionally you need to be prepared for the reality that they could all lose money.

One of the problems with your plan is you are taking on a partner and a friend as a tenant. You have the same person at opposite ends of the business. How do you figure you are going to serve him with a N4 for late payment or evict for non payment. If you think this won`t possibly or likely happen then that is another reason you are not ready to enter into this business.