Entering the property market with someone has many perks. You’ve got someone else to help you bear the burden of a deposit and repayments, plus you might have complementary skill sets and knowledge that makes the investment and management process easier. That’s not to say that there aren’t downsides to buying a property with someone, whether it’s a spouse, business partner or friend.
If you’re considering buying an investment property with a friend, there are a few things you need to consider to make sure you’re both happy with the transaction. Here are two key things you need to consider if you’re buying a property with a friend.
Think about the Future
Buying a property is a long-term investment. With most loan terms around the 30-year mark, you need to consider a property investment with your friend as a long-term investment. If you buy a property with a friend as an investment, you’ll need to be upfront and get the awkward conversations out of the way early.
For example, what happens if one of you wants to liquidate their portion of the property? You may decide that, in this scenario, you both sell the house, or the other person buys out the other party. These are big financial decisions, so you need to think about all the possible scenarios that may become a challenge and discuss how you’d deal with them before you commit to a property together.
Be Clear about the Loan
Even if you technically own half of a property, you are still responsible for the whole loan. This is because each person listed as an owner of the property is responsible for the entire loan if another party can’t pay their share of the mortgage. This is a crucial issue to consider, and you need to make sure you do your due diligence in ensuring the other party is able to pay their portion of the loan.
Buying an investment property with a friend can be an excellent move to help you build wealth and work on something new with someone you already like and trust. You do, however, need to be diligent about how you organise everything from the research and inspection process, buying the property, to figuring out what will happen if one of you wants to liquidate their investment in the property. Make sure you and your friend both speak to your trusted lawyers and finance professionals to make sure everything is organised before you embark on purchasing a property together.