It’s no secret that home ownership is expensive. Many people find the idea of ever being able to own their own home a daunting prospect, given the huge amounts of money that are involved. However, this doesn’t necessarily need to be the case. People who might otherwise be able to afford to enter the property market are able to gain entry via unconventional means – namely, buying with a friend, or group of friends. Below, we look at some of the advantages of this approach.
Friendship & Money
If you’ve ever lived with a friend, you’ll already have some idea of how friendships can become strained once money gets involved – many a friendship has been ruined over sums much more trifling than the price of a house!
As a result, you need to have a co-ownership agreement with very specific terms. It should cover areas such as:
- if one person defaults on their mortgage repayments
- if one (or more) party wants to sell their share in the house
- if one of the parties dies during the term of co-ownership
While the last one in particular may sound a little bit morbid, it’s a precaution that is necessary to take. You don’t want to find yourself in the middle of a legal battle with your friend’s family because you didn’t take the time to make arrangements at an earlier date.
Also, don’t go into business with a friend of whom you know he/she is bad with money. This may sound like common sense, but common sense can often go out the window when feelings are involved. Make sure that the people you buy a house with are fiscally responsible! Not only will this make getting the relevant loans easier, it will also mean that life will be much easier for you during the term of the co-ownership.
It’s A Short-Term Investment
Don’t forget that your friend/s are first and foremost business partners in this arrangement. Even if the terms of your arrangement are not particularly formal, it is still of key importance to keep this in your mind. Irrespective of the current closeness of your friendship, it is unlikely that you will grow old and spend the rest of your lives together – you are not a married couple, and likely have very different ambitions in this area!
Realistically, the house is likely to be sold within a decade, rather than providing a family home for the next few decades. As such, the parties involved should be looking for a property that is likely to increase in value at a speedy rate, rather than a slow-growth investment. This will enable costs for everyone involved being recouped if or when the property is sold.
Lowered Costs for Everyone
One of the main advantages of buying a house as a partnership or group is the reduced costs. The loans involved don’t need to be as large and other fees (such as lawyers and stamp duty) are greatly reduced. Expenses like these – as well as day-to-day expenses such as electricity rates – can be prohibitively expensive for one person to manage on their own. However, when they’re spread across two or more people they can enable you all to be able to afford a property while not being forced to live on baked beans and toast for the next 30 years.
Buying a property with friends is not advisable for everyone, but can certainly be a viable option for those who feel that they are currently priced out of the property market. A certain number of legal protections will need to be in place to protect everyone’s interests, but if it works out then it can be a path out of the “rent money – dead money” trap.