Is it possible for 4 unrelated friends to get financing on one property?

[maximusprime]

My friends and I are tired of renting and want to pool our resources to get piece of property in Dubai. We all have very good jobs, good credit, small monthly obligations, but none of us have the capital on hand to buy property individually. What is the best way to purchase and own property jointly?

[alexft]

Maximusprime,

The best way in your case is to form the company.


Regards,

Alex.

[maximusprime]

Originally Posted by alexft

Maximusprime,

The best way in your case is to form the company.


Regards,

Alex.

Thanks Alex, an LLC or JAFZA offshore company is something we have been considering. We have a potential local partner necessary for the formation of a local LLC. Will a bank be willing to make a business loan to buy property?

[alexft]

Maximusprime,

My pleasure. As to the question. It depends on the bank. I suggest that all of your become a company directors. Usually when bank deals with the start up companies directors credit histories are taken into consideration. Personal guarantees might be required.


Regards,

Alex.

[Roshan]

Originally Posted by maximusprime

My friends and I are tired of renting and want to pool our resources to get piece of property in Dubai. We all have very good jobs, good credit, small monthly obligations, but none of us have the capital on hand to buy property individually. What is the best way to purchase and own property jointly?

Fantastic idea. Why doesn't everyone think like you all. For rest of the post you will be called "The Fab Four "

Most of the developers allow only 2 names on the contract. The finance companies will consider statements and credit worthiness only of the names on the contract. However I will call a few people in the mortage industry and pose this question to them.

To protect your individual interests, the best option would be to form an off shore company having the fab 4 as directors, the interests of all the 4 are taken care of. This would not help you with finance but only as a measure to protect your individual interests. To qualify for a mortgage here, you will have to have a 3 year audit report. If anyone of you guys have a business with a 3 year audit report, you could apply for finance through that company with an internal understanding between you guys.

Are you guys planning a 3 or 4 bedroom house

Watch out for this space. Will post more after talking to the finance companies. Your question just became my research.

Regards

Roshan

[Roshan]

Originally Posted by maximusprime

Thanks Alex, an LLC or JAFZA offshore company is something we have been considering. We have a potential local partner necessary for the formation of a local LLC. Will a bank be willing to make a business loan to buy property?

3 year audit report is a must. I encourage you guys to go and sit with banks and present your cases. If one bank rejects, find out on what grounds, plug that loop hole, go the next....till you find a solution.

Do you guys have property back home. Do you know that you can take an over draft on existing properties which could meet your requirement. An overdraft can be paid after how many ever years you want, of course with interest. Look into this option.

Sit with banks and start talking. Who knows, they might offer an option which none of us thought of and you all could be trend setters.

Good luck.

Roshan

[maximusprime]

Originally Posted by Roshan

3 year audit report is a must. I encourage you guys to go and sit with banks and present your cases. If one bank rejects, find out on what grounds, plug that loop hole, go the next....till you find a solution.

Do you guys have property back home. Do you know that you can take an over draft on existing properties which could meet your requirement. An overdraft can be paid after how many ever years you want, of course with interest. Look into this option.

Sit with banks and start talking. Who knows, they might offer an option which none of us thought of and you all could be trend setters.

Good luck.

Roshan

Roshan,
Thank you for all the great tips. None of us have our own companies but one of the partners has a local family connection with plenty of real estate who may be willing to lend a helping hand. Some of us also have assets back in the US which are currently unsellable due to the mortgage crisis. Please tell me more about the overdraft idea, what exactly is it? Looking into the JAFZA offshore regulations it says that real estate is a prohibited business activities but it was vague in its description, I am trying to find more info about it. Thanks again for the tips

[The Soup Dragon]

Don't know what size of venture (£) you are talking about, but if mortages are available where you intend to buy then you just need to raise funds for deposit and other acquisition costs. You might be able to do that by taking a small loan each here.

Be careful though, money can do strange things to friendships. Have some sort of contract you all sign that spells out what will happen in each eventuallity you can think of. (For instance, circumstances change and there being four of you increases likelihood that this will happen. Spell out what happens in event one needs to withdraw - how is his/her renumeration/debt calculated? Additonially, where you are buying they may not take four applicants on a mortgage. Think very carefully about who should make the mortgage application and how the others will be legally tied in to the deal if things go wrong .... not fair on the person whose name is on the mortgage if negative equity situation arises and rental doesn't cover the mortgage. Others need to be legally tied in or they may be tempted to cut their losses and leave the mortgagee high and dry.)

[Roshan]

Originally Posted by The Soup Dragon

Don't know what size of venture (£) you are talking about, but if mortages are available where you intend to buy then you just need to raise funds for deposit and other acquisition costs. You might be able to do that by taking a small loan each here.

Be careful though, money can do strange things to friendships. Have some sort of contract you all sign that spells out what will happen in each eventuallity you can think of. (For instance, circumstances change and there being four of you increases likelihood that this will happen. Spell out what happens in event one needs to withdraw - how is his/her renumeration/debt calculated? Additonially, where you are buying they may not take four applicants on a mortgage. Think very carefully about who should make the mortgage application and how the others will be legally tied in to the deal if things go wrong .... not fair on the person whose name is on the mortgage if negative equity situation arises and rental doesn't cover the mortgage. Others need to be legally tied in or they may be tempted to cut their losses and leave the mortgagee high and dry.)

Wow, words of wisdom. Absolutely right. No better way of explaining things.

We need more of you on the forum.

Are u from Dubai. You could join the meetings we intend having by going to the thread " Dubai chapter of the forum ". Intend having the first meeting end of this month. We should have a lot to discuss there.

Regards

Roshan

[Roshan]

Originally Posted by maximusprime

Roshan,
Thank you for all the great tips. None of us have our own companies but one of the partners has a local family connection with plenty of real estate who may be willing to lend a helping hand. Some of us also have assets back in the US which are currently unsellable due to the mortgage crisis. Please tell me more about the overdraft idea, what exactly is it? Looking into the JAFZA offshore regulations it says that real estate is a prohibited business activities but it was vague in its description, I am trying to find more info about it. Thanks again for the tips

I spoke to Amlak yesterday. Only 2 names are allowed on the contract by most of the developers. Developers will always put more names just to make a sale, that does not mean that the bank will accept. Amlak generally will not accept applications for more than 2 names on the contract. Most important is that the 2 persons will have to be blood relations like father/son, sister/brother. They also said that some banks might accept. I don't know of this is a vague statement or if it's true.

What he suggested was that each one buys a 1 bdr or more which was a good poin,. and that brings us back to the wonderful point " the soup dragon made ". Money always changes relationships. Father kills son for money. Somewhere down the line, there are bound to be disagreements. Today you guys might be bachelors ( wow, I love those care free days ). Once you guys are married, just 1 additional person could change the equilibrium. I have seen relationships change, guys who were bosom buddies changing to sworn ememies.

Probable solution : Each one could buy a 1 bdr in one particular development and negotiate a better price, probably a 15% discount. You could be taken as bulk buyers.

Considering that there could be hiccups with one persons papers not coming through, always remember put a "subject to bank finance" clause whether you like it or not. I put this in one of my contracts because the developer was negotiating with the finance company and I did not pay 3 installments till the time the developer sorted his papers with the finnace company Pooh, eventually I had to pay 3 installments as once - OR - take the money back in full, but I decided to keep the property because the property appreciated very well. It was this clause which saved me, otherwise the developer would have threatened to pay up or esle face a cancellation charge which could amount to 25% of the value.

What I mean by OD is that. For eg, I have a property which I bought say for a million and on completion it has appreciated to 2 million. If I have zero liability on the property, I am eligible to leverage an amount equivalent to 50 to 70% of 2 million, which is a lot of equity. In other words you pledge your house to the bank. the bank swallows your property if you cannot pay. The money you have borrowed might have to be paid in monthly installments or not, depending upon the bank.

Don't give up on the idea. Keep questioning yourself, how do I do it and the brain which is such a powerful tool will come up with not one but 10 solutions. Remember " ATTITUDE DETERMINES YOUR ALTITUDE "

Keep us posted on your developments, because the idea of stop renting and buying is good which most of us do not take.

I have or will be posting a seperate thread " Amlak easy start plan ". Pls go through that.

Are u from Dubai. You could join the meetings we intend having by going to the thread " Dubai chapter of the forum ". Intend having the first meeting end of this month. We should have a lot to discuss there.

Good luck.

Roshan