The Pros and Cons of Joint Property Investment Commercial Mortgages | Commercial Property | Property Investment 28th January 2016 | By Paul Hunter Sometimes investing in property can be too expensive to do on your own. When this happens it makes sense to enter into the venture with a joint investor. As with any scheme like this, there will be pros and cons to entering into a joint venture – to allow you a greater level of understanding, here is what you need to take into account: What is Joint Property Investment? Quite simply, this is where you buy part of property with another investor. The amount does not necessarily have to be a 50/50 split; in fact either party can put in any amount towards the project. A commercial joint property investment is very different from Shared Ownership schemes for residential property, as this will not be done via the government or property organisations. Benefits of Commercial Joint Property Investment As you may imagine having two investors, rather than a sole investor, means that you have more equity between you. This not only allows you to have a larger deposit but will also mean that lenders are likely to provide you with larger sums. The result of this is that you will be able to delve into more expensive properties and therefore see an even greater return on investment than you would with cheaper buildings. Read more: What is the Future for Buy-to-let Investors? Other benefits include: • Allows for a more affordable way to enter the commercial property market, as you only need to provide half the deposit and mortgage on the property. If you do not wish to enter the market with ‘big ticket’ properties, then joint ownership allows you to buy in at half the cost. • Spreads the financial risk across two parties, meaning that you won’t be as vulnerable as you are when buying as a sole investor. • There are tax benefits to be had with joint ownership as you’re only taxed on your share of the joint ownership rather than the whole property. • Reduced cost to you for maintenance/ upkeep/ redevelopment again due to splitting the cost of this between the partners. • You also have flexibility to change the agreement, leave the joint investment, bring new investors in or sell your share in the property at any time. All these perks mean that this is a very tempting method of entering the commercial property market if you are transitioning from residential property, looking to expand your portfolio or acquire ‘big ticket’ properties with reduced risk and cost to you. That said, this is not a venture that everyone should enter into. There are downsides and drawbacks to owning a joint investment property – including: Cons of Joint Investment One of the biggest drawbacks to a joint investment is finding a mortgage lender with a package to suit you. This means that you may have to pay higher rates or more expensive initial costs when taking out the mortgage. Additionally, while you may have the flexibility to change the agreement, you will typically have to provide other partners with written notice of your intentions and receive approval of the action. Any changes also run the danger of incurring further Stamp Duty Land Tax, which can be payable whenever a partner: • Is introduced to a property • Takes a property out of the partnership • Or reduces their profit share This can incur large charges, especially with more expensive properties, and it is not something which can be borrowed against meaning that you have to have the money on hand to pay it yourself. Furthermore, it is a good idea to enter into a joint partnership with someone with similar values and interests as you. This will ensure that there are no disputes in the direction that the investment takes – i.e. buy-to-let rather than occupy and lease etc. Knowing your partner previous to investing with them is a good idea, as it can give you an idea about their financial background and information regarding any previous investments. Looking for a commercial mortgage broker to help you get the best deals on joint partnership mortgages? Talk to Pure Commercial Finance today, our team of experts are dedicated to finding the best deal for your requirements.