50/50 Investment Property

Let’s assume you’re planning to purchase property; a single-family home (4×2) in an area of North Bangalore that has a lot of upcoming development and will hopefully appreciate over time, then rent it out to tenants for the next 7-10 years. However, the market rent right now won’t cover the entire monthly cost (because you’re only putting 10% down), so you’ll be around Rs.4000/- short per month while it’s rented. And you have to pay that amount from your pocket.

But, for all this to happen you’re planning to invest 50/50 with your family (mom, dad, or sibling), who makes double your income, and as you plan to split major repairs, maintenance, expenses, etc.

Is it worth the risk and potential reward of appreciation? Let’s ﬁnd out.

Negative cash ﬂow and its repercussion

Whatever you pay from your pocket for the property beyond the yield is negative cash ﬂow. The fact that you are partnering with your family member and only putting 10% down, would make sense that Rs.4000/- a month is a big deal for you.

To invest 50/50 in a property with negative cash ﬂow becomes a hot potato when you need to have money for emergency repairs and no renters available. It deﬁnitely could put your family member in a bad spot.

Negative cash ﬂow property shouldn’t be your ﬁrst. Save, the market is correcting. Now is a bad time to buy. High interest and high pricing.

You should buy a place when things are correct and rent out a room or buy a duplex. House hack. Rinse and repeat a year or two later.

Feasible long-term beneﬁts?

If you’re focusing on long-term beneﬁts, then our answer is, it could work out long-term, rents for up, and equity will go up again eventually. But, to enjoy long-term beneﬁts you need to answer the below questions regarding your 50/50 investment property.

Are you ready for repairs?
Ready for inability to sell if you need the money?
Family members to force you to sell if something happens to your investment partner?
If their name is in it then, their opinions and the drama it could make, Are you ready for it?

In a long term, you’ll be good but that’s a lot to navigate.

Be cautious with vacancy cost

Be mindful of the vacancy costs when you switch tenants. But on the upside, you can gauge if rental rates go up. Every time you get a vacancy you just do minor repairs and release it again. In your last condo if you were renting for Rs.7000/- and when you released it, put up a cost of Rs. 7500/-so in a 5 months’ time or less, it gives you back the vacancy cost you lost for that 1 month. As this is a 50/50 investment property with a partnership with your family member, it will do good as long as both parties hold up to their agreements.

Think clearly before you enter into a partnership

Homeownership is always more expensive than you think it will be. For example, have you thought about window coverings? These can easily run into the thousands in a new home and nobody will rent without them. Also, landscaping and keeping it up when you do not have a tenant in there can be very Even when you do have a tenant oftentimes they undo what you have done because they do not want to pay for the water to take care of the lawn.
In a 50/50 investment property, you would sort of be taking advantage of your family member because they’d be paying for half of everything but you’d be getting all the write-offs and tax So,
You should be accounting for the fact that every time you are between renters you can lose a month of rent on either side of that lease. That’s just another expense. You also spend a lot of money cleaning and preparing the home for new So all in all it’d be like you will be upside down way more than Rs. 4000/- a month.

We suggest starting smaller and learning the landlord lessons on a beat-up old condo somewhere, and then you will be ready to ﬁnd the real deals.