Anyone who has rented knows the soul-sucking feeling of fortnightly payments to their landlord. And if you’re working and not seeing your assets or savings grow, this only adds insult to injury.
This is usually when the penny drops and you start thinking about ways to launch onto the property ladder yourself.
If you have no dice roping in your parents, and you can’t settle on a favourite colour let alone a life partner, you start to turn to your siblings and your friends.
So what are the benefits and risks associated with co-owning a house with your platonic relations? And how should you best go about it?
The pros of pooling together
Nobody wants their bank account to become skinny as a pressed-juice detoxing yogi, which is exactly what renting feels like. So the obvious plan is to enter the market and purchase a home.
Then you can feel secure that your payments are going towards owning something that will benefit you in the long term.
The obvious benefit of pooling for a property is the shared cost.
Purchasing a place with others means you effectively halve (or more depending on the number of people) the cost of a down payment and subsequent repayments.
Another plus is that combining your savings and earnings means that you’re able to access a higher price bracket than you would normally have access to on your own. Better house, better location, and perhaps access to a more attractive lifestyle.
You will also be future proofing yourself. Currently interest rates are at an all-time low, therefore multiple incomes provide the added comfort that you won’t be feeling the full force interest rates when they do rise.
The risks of co-ownership
Have you ever pooled with your mates to buy a present for someone? It all goes great if contributions are equal, but what if one person puts in a larger sum than others? Does that person get more credit? Do you feel obliged to spend more now that someone else is forking out more? Or is it fair if they are in a higher paying job?
A number of complications will arise out of pooling funds together, and these complications inflate when something as big as property is involved. So consider if splitting a property is something that you want to tackle in the first place, because sharing costs means sharing ownership.
Needless to say, one of the biggest risks of co-ownership is potential for conflict. Regardless of your relationship, if there is a dispute there will be difficulty in understanding how to address the mortgage repayment.
Having very clear agreements upfront can mitigate a potential relationship breakdown, so get in touch with a lawyer prior to committing to a purchase to put terms down from the get-go.
Another risk for co-owners is that the boost of combined incomes means that people can get over-confident and overextend themselves. Just because you can afford a plusher property doesn’t mean you should max out to buy one.
So how do we actually do this?
Here’s a step-by-step process to pool for property:
1. The first and most important thing to do is sit down with the person you’re considering partnering with to make sure your intentions are aligned. Are you purchasing for an investment or to live in? Are you both of the same stage in your life, or is one of you planning to grow a family soon?
2. Speak to a professional to better understand the marketplace. Are you in a financial position to buy and what can you afford in this market?
3. Find a lawyer or consultant to articulate who is responsible for what, and outline the balance of ownership.
4. Research the current market offering and what is viable for you to purchase in the short-term.
5. Make sure you have your i’s dotted and your t’s crossed. Get your finance pre-approved before shopping around.
6. Once you have secured a place, remember to always go back to your agreement. Pull your weight around the house and use your agreement as the rules to reference in the case of any disputes. Regular house meetings can make sure you nip any grievances in the bud early.
Huge deposits and scary repayments shouldn’t frighten you into your landlord’s arms if you don’t want to be there. If owning your own property is a major goal for you, there are flexible ways to get there. You just have to consider the risks first.