What do I need to think about when buying a property with a friend?

Frances Fernandez Posted on 30 Jan 2023

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.