Joint ownership is an excellent option for investors and owners who want to pool their resources and buy a rental property together. In California, most married couples will have joint ownership over any real estate that’s owned.
Fractional ownership is when two or more co-owners have an undivided financial interest in the property. As a joint investor, you’ll be entitled to a portion of any income your rental property earns.
There are a few things to prepare for when you’re considering or managing a joint investment property. At EGL Properties, we work with these situations frequently, and we’re sharing some tips today.
Property Management Los Angeles: Benefits of Joint Investment Property
The best reason to make a joint investment is that you don’t need as much cash to enter the real estate market in a deal like this. Instead of pulling together a down payment and securing financing on a $500,000 investment property, for example, you can take fractional ownership of it and divide the costs of acquisition with another investor or a team of investors.
Another advantage is that ownership of the asset will easily be passed to the surviving owner if the other party passes away. While it’s common to make this type of investment with a spouse or family member, you don’t have to be related to the other party with whom you are investing.
Finally, the responsibility for maintenance costs and improvements is shared between you and your partner or other owners. That eases the financial burden of maintaining, marketing, and turning over a rental property.
Property Management Los Angeles: Disadvantages to Joint Investment Property
The main disadvantage is what you face with any group project or fractional ownership situation: everyone has to agree on how money is spent on the property. There could be disagreements over whether a new roof is really necessary and you may not agree on how and when to sell the asset or exchange it for another. If you decide to end the joint agreement, you’ll need a court to dissolve the partnership and that may include some steep legal fees.
You’re also at the mercy of your partner’s financial reputation. Creditors who are trying to collect a large debt from one party can seek to divide the property and force a sale in order to collect what’s owed from one of your joint investors. You’re sharing the investment and you’re also sharing financial risk.
LA Property Management Can Help with Joint Owners
If you’re going to invest with others, professional LA property management is essential. When you have a qualified, local property manager taking care of your property, you’ll have a subjective third party making recommendations and decisions that are in the best interest of the investment. There won’t be any emotions involved, and it will be easier to mediate disputes and avoid conflicts.
We’d be happy to help you when you’re investing with others. Talk to us about our experience with these sorts of fractional ownership situations and our expertise when it comes to LA property management. Contact us at EGL Properties.