Assuming that in general the purchase is a good investment (and that the short and long term income potential versus up front and ongoing expenses is appealing), consider the following questions before joining forces with a fellow investor on the deal. (Be sure to also consult an attorney and tax advisor before entering into a real estate investment.)
1) Do you trust the person/people you are buying the home with?
This is extremely important, and while you can never predict with 100% certainty what someone else will do, it is crucial to give it serious thought. If the other party is a close friend or family member the trust issue may not be fear of being swindled, but rather can you trust them to follow through on their end of the bargain? If they are in charge of paying the bills on the home do you feel confident they will be paid ontime?
2) How will you handle disagreements?
One partner wants to update the kitchen and another wants to save the cash for a rainy day. How will you resolve differences of opinion? It is best to discuss this before any issues arise?
3) What is the exit strategy?
Do you have a plan in writing should one party want out? Does the other investor have right of first refusal to buy them out? How will a price be determined? Can they sell to anyone?
4) How will the work be divided?
Think through things such as taking care of the finances, finding renters, handling tenant issues, and maintaining the property. Which tasks will each partner be responsible for, and which will you hire a professional to manage, such as a property management company, accountant, or contractor.
5) Do you share a similar appetite for risk?
Any investment involves some level or risk, and real estate investing is certainly no exception. Partners in an investment will ideally either both be comfortable with taking risks, or both be happier playing it safer, taking a slow and steady approach. Be sure to discuss this thoroughly before purchasing a property.
