finance

Splitting the cost

By Stacey Moseley

Buying a property with family or friends can be a nifty way to kick start your property portfolio, provided it’s done correctly.

 

While not without risk, buying an investment property with family or friends can have financial benefits. Co-purchasing may not only give you easier access to finance by combining your borrowing power, it can also mean you can own an investment property quickly.

With the average Australian median house price sitting at $483,500, and the average new owner-occupier mortgage now $287,700 (according to RP Data), there’s a lot to be said for pooling finances to achieve an investment dream.

Joining forces with friends or family may secure you an attractive investment and even a larger investment than what you could have afforded alone.

Splitting a property’s maintenance and utility costs, as well as mortgage repayments, will also certainly ease the pain of owning an investment property.

Like any investment venture, however, there are traps to avoid and when it comes to co-purchasing, the biggest trap is failure to communicate with your fellow investors. Most disputes arise because buyers are unclear about the terms of their joint venture, with arguments occurring over bills, shared use, repairs and so on.

It’s therefore important to communicate with your co-buyers about each other’s needs, budgets, plans, obligations and exit strategies – and to put them down in writing.

A second risk is getting in over your head. If a co-buyer enters a loan agreement, they generally become liable for the whole of the mortgage, not just their individual share. This can cause serious financial difficulties if one borrower loses their job, pays late, or fails to meet lender requirements.

Therefore, whether you invest with family or friends, you should treat co-purchasing as a business deal.

It may help to have a third person present during discussions as they can ensure everyone has a fair say. Ideally, each buyer should also have their own legal representation, so their individual interests are protected.

With clear communication about all aspects of buying, occupying and managing the property, plus a willingness to document the transaction, there’s no reason why your co-buying experience can’t be an enjoyable one.

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Splitting the cost
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