Buying Property with a Buddy

Even when there is limitation to funds, there are many options for an average Australian to become a property owner or investor. One of these options is co-ownership.

Co-ownership occurs when a property was bought with a partner and the two incomes were used to meet the affordability and loan serviceability criteria. Each individual buys a property and own separate shares. The shares of each partner can be divided equally or unequally, depending on the agreement between them. Also, a partner’s property share can be passed on or left to whomever they like if he or she dies. Hence, we can say that co-ownership is a way to get into the property market by pooling resources with other like-minded property purchasers, who could be family and friends or anyone else.

What are the benefits of buying property with a buddy?

  • Combines and pools your financial resources together – this could significantly increase your purchasing and borrowing power
  • Shared financial burden – the costs of buying and daily costs of being a property owner is shared with your partner
  • Earlier entry to the market – because your have your buddy to cover the deficit, you don’t have to wait to save the full deposit for the property or cover the costs of purchasing
  • Reduced borrowing costs  – you and your partner can collectively contribute a deposit and thereby save on mortgage insurance
  • Boosted loan application strength in numbers will give you access to finance you might not otherwise have qualified for.

What are the drawbacks?

  • Joint and Several Liabilities –  each co-owner will be individually and collectively responsible for meeting all loan repayments and obligations
  • It could strain relationships – financial problems are a big contributor to relationship breakdown with spouses, family and even friends.
  • Exiting a co-ownership arrangement is complicated and often impossible – in worst case scenarios, property may have to be sold, even if it’s not in the best interests both parties.
  • No money-back guarantee – it is best practice to seek the advice of experts and ensure that your fellow owners understand the risks and rewards involved.

Things to consider before you commit to co-ownership

  • Be Objective – think with your head and take the emotion out of the question. It is best practice to ensure that everyone gets independent legal advice. An agreement should also be drawn to establish all the parties’ expectations, rights, and obligations.
  • Choose your partners carefully invest with  trustworthy buddies who have similar views and  enthusiasm in property investment
  • Invest with as few buddies as possible – to minimise the complications and problems, it is best to invest with maximum of three or four buddies
  • Wise borrowing and buying – be practical in locating the right property to invest and be reasonable in choosing the best loan for it.
  • Take note of the risks – investing, even with a buddy, have personal and financial risks and you must be ready to deal with them.

Uncertain if co-ownership is the best investment strategy for you?

Talk to us and we will be happy to assist you!

*This post originally appeared on To read more, kindly see Key Things to Consider when Buying with Friends.

Happiness is not something readymade.  It comes from your own actions.
–Dalai Lama

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