How singles can buy properties outside their budget, faster

With every increasing rental price, the cost of renting a room or a small apartment could be similar to half of the repayment on a mortgage, making the idea of purchasing a tempting option for many Australians.

Buying with someone other than your immediate family isn’t just for aspiring buyers wanting a home. Investors could also partner up with a fellow investor to purchase a share of an investment property.

Imagine only having to save half the deposit, pay half the mortgage and cover only half of the bills, and you’ll be building wealth at the same time. However, you should keep in mind mixing money and friendship doesn’t always end well.

With that being said, if you’re single and want to buy a property outside your budget, you could consider buying a property with a friend that has similar property buying desire as yourself, but there are a few things you need to take into consideration before jumping in with any old friend.

Before entering a property buying partnership with someone other than your immediate family, consider these:

1. Have a formal agreement

This tip is at number one for a reason. It’s no big revelation that sometimes people disagree with each other, so to put less strain on the friendship it’s best if you prepare a co-ownership agreement outlining the responsibilities for each of you and the steps to follow through various stages of the investment.

A solicitor can prepare this document for you.

2. Discuss all the costs

If you are taking on a big commitment with a friend, it would be beneficial if your friend was fully aware of all the ongoing costs involved and reliable in making payments on time.

3. Select your buying partner wisely

It is worthwhile for each of you to get independent legal advice about the joint ownership. It is also important to discuss your plans with your accountant, mortgage broker and solicitor to ensure that all the documents, including the property title and the mortgage, are set up most appropriately for the partnership.  

4. Cover ‘what-if’ situations

Everyone buying property with a friend does so with the best intentions but situations can come up that require a new direction and either you or your friend may want to sell.

What’s going to happen if one of you wants to purchase property with their new partner or experience a change in financial circumstances. It’s good for the friendship if the exit strategy for different scenarios is recorded in your partnership agreement.

5. Protect the downside

If a responsibility is shared, both parties have to carry their weight but if one person becomes ill or gets injured and can’t earn an income, having adequate insurance can cover their share of the costs.

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This article does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.