5 Tips To Avoid Hidden Mistakes of Co-Owning Rental Property
Investing in a rental property in the San Fernando Valley is usually a great decision. However, when you don’t have enough money to buy a rental property, you can always team up with a friend or other like-minded investors to buy and manage a rental property. It is a great way to reduce the risks involved and enjoy the profits that come from co-owning rental property. And sometimes, the person you team up truly adds to the equation by bringing talents, skills, or experience you may lack. But you want to be careful. There are definitely different elements of co-ownership that you want to consider when going into ownership and possibly management of an investment with a partner.
Co-owning rental property is becoming a common practice these days, especially as prices are at all time highs for most property types. Most people do it because it sounds a good way to overcome the problem of being priced out of the market, and seems like an easy way to become a landlord. I have seen many friends that are in this type of arrangement. On the other hands, siblings can inherit a property from their parents and decide to manage it together.
The success or failure of co-owning rental property will depend on people who own it. Unfortunately, there are some hidden mistakes that most people are not aware of which usually lead to some huge problems. In this article, you will learn about these hidden mistakes and how you can avoid them.
- Share The Responsibilities
You can better manage a rental property when you adequately assign a task to every individual so they know exactly what their responsibilities are. It is a bad idea to leave everything to everybody. This type of arrangement never works.
Every co-owner should know his responsibility, what to do and when to do it. You should also communicate regularly with yourselves. Some basic responsibilities you can share include:
- Marketing
- Maintenance and repairs
- Property showing
- Rent and finances
- Tenant screening
- Discuss Your Goals
What are your short and long-term goals? Do you want to remain in this partnership for the next 20 years or you want to buy out a partner at some point? You should discuss what your goals are. If you plan to make enough profit and use the profit to buy another property, it should be addressed properly so you can work towards it.
- Divide the Expenses According to Your Contribution
Co-owning rental property means you share the profit as well as expenses. A great way to share the expenses is to divide it proportionally according to each co-owners percentage share in the property. In a situation where everyone has an equal percentage share in the property, the expenses should be shared 50/50.
- Agree On the Type of Tenant You Want
To ensure the smooth operation of your business, all the co-owners must work together to decide the type of tenants you want in your rental property. You need to make a tenant criteria checklist. While you are at it, discuss how long you want the lease term to be and of course, any other matter that affects your business. For the smooth operation of your business, it is very important that all partners are on the same page.
- Discuss When You Will Make Improvements
There comes a point when you will need to make some major improvements to your rental property. One partner shouldn’t make this decision for everyone; doing so can cause problems. Instead, every co-owner should come together to discuss what needs to be improved and when. Every co-owner of the property needs to take part in discussing all the major projects such as remodels and more.
