Buying an investment property with a friend
17 Jan 2023
Buying a property with friends can be a great way to enter the real estate market, but it’s important to understand the potential risks and benefits before making a decision.
Pros:
- Share financial burden: When buying a property with friends, the cost of the mortgage, taxes, and maintenance is shared among all parties, which can make it more affordable for everyone.
- Greater buying power: By pooling resources with friends, you may be able to afford a more expensive or desirable property than you would be able to on your own.
- Potential for rental income: If you purchase a property with friends that you plan to rent out, the rental income can be split among all parties, which can help cover the cost of the mortgage and other expenses.
- Sense of community: Buying a property with friends can be a great way to build a sense of community and to create shared memories.
Cons:
- Potential for conflict: Sharing a property with friends can be a recipe for conflict if everyone doesn’t have the same expectations or goals. It’s important to have clear communication and a plan in place for what will happen if one of the friends wants to sell or can no longer afford to contribute.
- Financial risk: If one of the friends is unable to make their share of the mortgage payments, the other parties may be held responsible for covering the cost. It’s important to have a clear understanding of the financial arrangements and to have a plan in place for what will happen in case of financial hardship. Your borrowing capacity for any future solo projects may also drop as most lenders will allocate full liability of the shared project towards you and only accept your share of rent.
- Legal complications: Buying a property with friends can be legally complicated, and it’s important to have a clear legal agreement in place to protect all parties involved.
- Limited Privacy: Sharing a property with friends can also limit your privacy and freedom to make changes or renovations to the property as you wish.
- Risk of default: it also increases the risk of default if one of the parties is unable to make their mortgage payments. It’s important to have a plan in place for how to handle this situation before it arises.
Buying a property with friends can be a great way to enter the real estate market, but it’s important to understand the potential risks and benefits before making a decision. It’s advisable to have a clear communication, legal agreement and have a plan in place for any possible eventualities. It might also be beneficial to speak to one of our mortgage brokers to get a better understanding of the financial implications of buying property with friends.
