Newbie Buying Property with 4 friends

[Kevan Davidson]

Okay, So myself and four friends are looking to get into the real estate business (we all live in Toronto, Canada but are looking to buy in London, hamilton, Or Windsor ontario) . I will be graduating from University in June and starting a salary based job, I am looking to use the cash flow from that job as leverage to build my real estate portfolio. Myself and four of my friends are looking to go on this journey together (also using their own salary as to cash flow to build our collective portfolio)

As are all fairly new, we have a few questions like:

Should we incorporate ?

If we don't incorporate, whose name should the property be in ( if we buy it individually and take advantage of the first time home buyer incentive in ontario we can put 5 percent down instead of 20 and keep cash reserves encase something happens to the property.) ? This would allow us to use the 5 percent rule potentially five times as well. 

We were also wondering how we get access to short-sell/foreclosure auctions. 

Further we are aware that you don't know what you don't know, so we'd love any and all advice as we embark on this journey to own our financial futures. 

Thanks in advance for your help and I am eagerly awaiting any comments that can point us in the right direction. 
 

[Timothy VanWingerden]

If all four of your are planning on buying one property, I would most definitely put it into an LLC with each of you as partners and have an operating agreement in place.

If you want to take advantage of the first time home buyer route then you can first buy individually it and change it into a multi-member LLC later. There is a "due on sale clause" in most mortgages which states upon the change of title the bank can call the loan. However, I haven't heard of this happening to someone (although I'm sure it has), and the bank usually doesn't care as long as they are receiving their payments.

I would continue to read and try to develop some investing goals --odds are that 4 of you are probably going to have different objectives down the road so you should take some time to consider the negative ramifications of partnering. Granted it mitigates the risk but you also lose a level of control.

I understand the value of partnerships, as I've already done a few. I make sure they are clearly defined and everything is in writing. 

Best of luck