Did you know that 83.5% of Australians say they wouldn’t even conceive buying a property with one of their friends. However, for many single Australians, buying with a friend solves the challenge of how to get a foot on the first rung of the property ladder.
So, if you’re considering buying real estate with a friend, take our advice and cover these bases:
Use a co-ownership property agreement. This sets the ground rules from the outset and outlines what your expectations are and seriousness of the commitment. As a co-ownership agreement is a legal document, there will be clear steps to follow in a disagreement.
- Determine how property costs will be shared
- Have an exit strategy. Whatever can go wrong might go wrong so you need to plan for the worst and hope for the best.
- Things to consider are:
- What happens if one of you dies, becomes seriously ill or disabled?
- Loses their job
- Goes bankrupt
- Develops interpersonal problems with partners, friends or family
- Your property has to be sold at a loss
- Choose the correct title on the property. A ‘joint tenants’ title means that, following the death of one of the borrowers, the property will automatically transfer to the co-owner and not those specified by the deceased in a will. ‘Tenants-in-common’ is the other type of title whereby the death of a co-borrower results in the property rights passing onto those nominated in their will. This is the better situation for passing on assets to a spouse, relatives and dependents.
- Understand how the title you choose affects your borrowing power. Get adequate property insurance cover. You will be bound by a co-borrowing agreement so it is important that you are covered if the conditions are proscriptive during times of financial stress.
- Consider life insurance options, health cover, income protection and home and contents insurance.