Buying property for the first time can be a little bit like having a baby. Well meaning family and friends might warn you that life will never be the same again or tell you that this is the best thing you’ll ever do.
As soon as you mention your plans, even strangers might start offering unsolicited advice about where they think you should buy, the type of property that might be best for you or what they’d do if they were you.
But in the end, buying a property (just like starting a family) is personal. It’s not for everyone and everyone’s story is a little bit different.
Take best friends Gabe and Andrew for example. They have lived together in rental properties in inner Melbourne for the past eight years and every time they sign a new lease together they promise themselves that this will definitely be the last time.
They have weighed up the advantages and disadvantages of renting and are ready to seriously consider owning their own home.
These friends have been saving for a deposit individually and would love to own a place of their own, but it’s not that easy.
On more than one occasion they’ve talked about pooling their funds to make this happen, but they find the whole idea of co-owning exciting and terrifying in equal measures. Nevertheless, they have started to ask some important questions.
- What is our budget?
- Can we access any first home buyer grants?
- Is our deposit big enough?
- What is the best financial institution to talk to?
- Can we afford to live in this suburb we call home?
- What if we decide to go our separate ways?
Many property experts caution against co-ownership saying it’s better to own something on your own rather than risk the consequences of what might happen if you have a falling out with your best friend or your life circumstances change.
But because many Australian property markets seem to be out of reach of many, the story of Gabe and Andrew is not unique and many are turning to alternative means of purchasing property including co-buying.
Here are the top five things to consider when buying a property with a friend or family member
- Seek independent legal advice
Property ownership has its risks and co-ownership is no different. Getting everything sorted in writing is essential. Your lawyer will probably advise you to enter into a co-ownership agreement – an important legal document that sets out the rights and obligations of each person with a share in the property. This agreement may include a dispute resolution clause, the proposed exit strategy and a financial default plan.
- Make sure you are on the same page
At the outset, you’ll have to make some big decisions. It’s important that all parties agree on how much they’re comfortable borrowing, what percentage of the property each of the buyers will own (if choosing a tenants in common arrangement). This split can be whatever makes financial sense for each party. Of course, you’ll also have to agree about what type of home you’d like to live in and its location.
- Open communication
Even if you’ve been friends for a really long time, open communication is key. Having honest conversations can really help you manage any difficult situations that may arise during co-ownership.
- Consider all the risks and benefits
It’s important that you enter a co-ownership having considered all the pros and cons – these will be unique to your situation.
- Take the emotion out of the equation
If you’re considering buying property with a close friend or family member, you may think you know them so well and trust them so completely that it’s not necessary to take out a legally binding agreement. But things can and do change and ‘life happens’ which is why it’s essential you take a pragmatic approach to this whole undertaking. Believe us when we say it’s in everyone’s best interests.
Whatever your property journey, it’s always important to be as well-informed as you possibly can be.
At Settle Easy, we can help you understand how property law will apply to your unique situation and we can work with you on your co-ownership agreement. Our property lawyers are experts in this area and can help answer any questions you may have.
We’re here to help you settle easy – no matter how you make that happen.