The risks of investing in real estate with other people

Many people think that it is a good idea to pool their resources to buy an investment property as it spreads out the cost of an expensive asset, but there are pitfalls aplenty in such an approach.

- Tan Ooi Boon

The key consideration is an exit strategy, even if you are making the purchase with relatives or good friends. This is because unlike shares, which you can easily offload in the stock market, a property sale requires the consent of all owners, and this can become tricky if one party disagrees.

So if you need money and want to sell the property, you may end up fighting with the other co-owners if they refuse to sell. You may not even be able to offload your share if the others do not have the means or inclination to buy you out.

The case of two brothers who bought a property offers perhaps the starkest reminder of how such an investment can turn out to be a nightmare; their relationship was so bitter that they did not even speak to each other for a decade.

When they finally decided to sell the house, they communicated through lawyers but even that did not stop them from going to court.