Q. My extended family members and I are considering pooling all our financial resources to invest and renovate rundown properties; we feel able to enter the market at this point as prices have come down to more affordable levels. However, I am reticent to join the group because one of the family members has a past record of bad debt. They have assured the group that they have overcome their financial problems now, but I’m still worried as my personal investment represents the entirety of my life savings. Can you suggest what we can do to make this a successful property developing venture, as I’m really keen to join and cash in on the market before it rises again?

A. It is a fact that, together as a group, you will have far more buying power which should reap rewards in the current climate, so it could be a good financial move subject to finding the right property. But first, a word of caution. I would suggest all parties meet with an independent lawyer with whom none of you have had any previous dealings. The purpose of the meeting should be to draw up a formal agreement which will a) set out the terms of your business arrangement, b) show where financial responsibility lies, and c) dictate any opt-out and release clauses should one of the group wish to leave mid-project. It should also show how any costs, profits and losses will be apportioned. Without such a document, the venture will be based on nothing more than trust – with potentially serious financial implications should problems occur down the line, or if trust breaks down between various members of the group. One important thing all members should address is assessing the creditworthiness of the member with previous debt problems. This could be an issue if applying for finance including their name. Good luck!

This entry was posted on Sunday, February 1st, 2009 at 11:00 am and is filed under Legal, buying. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.