Things to Consider When Buying Real Estate With a Business Partner in Ontario

Maybe you have a contact who has offered you an ideal real estate investment opportunity, but you do not currently have the financial ability to take advantage. Or maybe you have some money to invest, but do not have the time necessary to manage or oversee your real estate investment. Investing with a business partner can allow you to jump into the real estate investment business now, rather than waiting for an elusive perfect time.

Our Richmond Hill real estate lawyers may be able to walk you through all the things to consider when buying real estate with a business partner in Ontario.

Choose Your Partner Carefully

When choosing a business partner, or business partners, think about what each of you bring to the partnership, and what each of you lack. Who has the money to invest, or the ability to borrow? Who has the time and expertise to manage the investment? Who has the knowledge and the contacts to find the perfect investment opportunities?

Beginning with these considerations may help you to not only choose the right partner, but to plan out how responsibilities will be divided for the duration of your partnership. Communication is also a very important thing to have with your partner. Always communicate everything ahead of time.

Plan Ahead

Before you purchase real estate with a partner, have a plan for the entire life of your partnership. Your plan should consider:

  • How you and your business partner will handle mortgages and financing
  • A mechanism to allow one partner to sell their share of the partnership if necessary
  • How long you plan to own the property (is this a short-term investment or a long-term investment?)
  • A mechanism for resolving disputes between partners
  • Which tasks will be taken on by which partner
  • How you will come to decisions together and what frameworks you will use for those decisions
  • How you will earn a return on your investment.

How Will You and Your Partner Register Ownership of the Property? 

Real estate can be registered in the personal names of the owners, or in the name of a corporation. Using a corporation can provide some protection from personal liability but comes with extra accounting and legal expenses. Look at your options carefully and consult with a lawyer so you can make a fully informed decision.

How Will You Make Money From the Property? 

If this is a real estate investment, there should be a solid plan in place that includes earning a return on your investment. Will you build on bare land and then sell? Will you repair an existing building and then rent it out? Having a concrete plan enables you and your partner to know what to expect and to evaluate your progress.

An important consideration in how you will earn money from the property is how you will pay taxes. Income from property (rental income) is taxed differently than income from business, which is in turn taxed differently than capital gains. Knowing how you will be taxed is an important consideration in calculating an anticipated return on your investment.

Once you have a partner, a plan, and a property in mind, you should keep things professional with a written agreement.

Contact our Richmond Hill Real Estate Lawyers Today for a Consultation

From setting down your dream plans to drafting your written partnership agreement and making your real estate purchase, it can be of great benefit to both you and your business partner to make sure all parties involved understand and agree to the terms of the relationship. This may help prevent or mitigate potential conflict in the future, the assistance of a real estate lawyer may help clarify the things to consider when buying real estate with a business partner in Ontario. Contact us today to book a consultation and see how our Richmond Hill real estate lawyers may be able to help in your specific case.

* Please note that this article is not intended as legal advice, but rather as an offer of introductory information about an aspect of business real estate in Canada. Please consult with a lawyer for legal advice.