Buying property with friends or family members can be a great idea when looking to get on the property ladder, especially with prices going through the roof like they currently are in Sydney. However, co-buying property is not for everyone and should be carefully considered first.
Before purchasing property jointly, you need to have in-depth conversations together to find out what you both want and that you are on the same page. Some of the things you need to work out include:
- Are you splitting the property 50/50 including costs?
- Will you be buying the property to live or as an investment?
- What is your budget?
- Where do you want to buy?
- What type of property do you want to buy?
- What happens when you want to sell the property?
It is also extremely important that you have a good relationship with the other buyer as you need to be able to trust them and agree on decisions together. You also need to be open and honest with each other to avoid any conflicts and disagreements.
If you are looking to co-buy a property then you should seek the advice of a solicitor who will be able to help draw up an agreement between all parties. This should include the responsibilities and rights of each buyer and will take into account factors like what will happen if one party decides to sell.
Pros of buying property with friends
Buying a property with friends has many advantages which include:
- Affordability - Makes property ownership much more affordable as you are sharing the financial burden and halving costs and expenses.
- Get on the property ladder sooner- Allows you to buy a property sooner as it takes less time to save a smaller deposit.
- More capital – With more capital available, this gives you the option to buy something larger as well as providing you with more choice on the location.
- Build up equity – You are likely to build up equity in your property, whether you are paying down the mortgage, or the property value has increased. This can allow you to purchase your own property using the equity in the not so distant future.
Cons of buying property with friends
As well as there being advantages of buying property jointly, there are also disadvantages of buying property with friends that you need to consider:
- Not being able to pay the mortgage – You might end up having to cover costs if one of your party cannot meet mortgage repayments or defaults. This in turn could affect your credit rating as both names are on the mortgage and you are both held responsible for paying on time.
- Disagreements – If problems arise then this may cause major disagreements and fallouts and friendships could suffer, especially if you are living together.
- Can’t just walk away – A property is a commitment, so if something happens such as a job loss and you need to sell quickly, this can take time.
To avoid these problems, it is best to have an agreement set up and signed so everyone is on the same page and your friendship is long-lasting.
Published on 25th of August 2015 by Marty Stanowich