Interest rates are the lowest they have ever been, however, many people are still finding it challenging to purchase a property on their own, especially the younger generation. If you have a family member or friend looking to enter the property market or eager to climb up the property ladder, the solution could lie in buying property with family and friends or utilising current equity in the family home or investment.
While there is always the chance of unforeseen issues with those close to you, there are also many benefits from teaming up with your loved ones to acquire a new property.
There is a better chance of home loan approval – Having two or more people on the home loan application can facilitate the process and increase the chances of being approved as two incomes are generally better than one.
Split expenses – Buying a property with someone else means you’re splitting all the costs, making it easier and more affordable.
Unpredictable circumstances – A fall out with a family or friend is not uncommon, so it is important to remember to separate business from pleasure and not let personal issues get in the way of your property ties.
Selling – Unforeseen events can have you or the other party/s wanting to sell up. As the process of selling can often be complicated or a lengthy one, you need to make sure that you have a strong relationship with the person you are buying with.
When entering into any type of financial agreement with family or friends, it’s wise to get a co-ownership agreement drafted by your solicitor to avoid any disputes. This agreement will outline any obstacles you may face such as who chooses tenants, property managers or what happens when one of you decides to sell. [Refer to our Mar – Apr issue]
If you have a family member or friend that is looking to purchase a property we are here to assist and offer advice.
This is not a happy topic to write about, but one that is reality.
If you or someone you know has recently divorced or are going through the separation process (and you own property) then you are going to have to determine how to administer or divide your shared property investments, which more often than not will involve lawyers.
We understand that this process can be overwhelming and stressful.
During these times it is also important to note (from previous experience) that for any changes to occur to rental payment bank account details we must have written and signed instructions from all parties, which is part of our standard agency process.
If you are reading this article and you are the two who are still married, or if you are considering getting married we would encourage you to seek legal advice on a co-purchase or ownership agreement when buying a property with a partner as it can serve to protect both parties. It outlines who pays the bills, who is liable in the event of a relationship breakdown, and how one of the parties can sell their share of the property (if you even want that to be a possibility).
If you invest hundreds of thousands of dollars on a home, even millions, you may want to make sure that you are protected no matter what. You don’t want to find out that you don’t have any claim to the property after the relationship has broken down and then lose all of the money you put into the investment.
When you decide to purchase property with someone else, be it a significant other, family member or a group of friends, you have the choice between a ‘Joint Tenancy’ or a ‘Tenancy in Common’. In a Joint Tenancy, each investor in the property has equal shares and equal responsibilities, regardless of how much they put towards the home deposit or how much they pay off the mortgage.
In the event of a separation that requires you to sell your investment, both parties receive an equal share of the profits (or are liable for an equal share of the losses). If you are married, this might be the best choice based on your shared finances.
If you have purchased a property through a Tenancy in Common, you may have uneven shares in the home. If you paid 70% of the deposit, you will be paying for 70% of the mortgage and the bills, and you will receive 70% of the profits. Your partner, on the other hand, will only receive 30% of the profits.
If you need to sell or if you find yourself in this situation, our team of experts are here to offer confidential value-added advice on the sale process as well as a free ‘no obligation’ appraisal (if required) to assist in listing the property for sale to achieve the best possible price.
We also recommend that you seek professional advice from your lawyer and accountant.
If the rent for every property we owned covered the mortgage payment, we would probably be far more relaxed. But for the majority of investors this is generally not the reality. More investors than not, are relying on the weekly rent to meet payments and expenses and we understand the importance of achieving the highest possible rent.
The achievable rent on a property is no different to the sale of a property. It is determined by the condition or presentation of the property, inclusions, location and more importantly, the supply and demand of tenants at the time.
When determining the rent of a property we must take into consideration the properties on the market at the time. If the property becomes available during a period of time where there is low tenant demand and a high number of vacant properties the rent achievable can go down.
It is for this reason that it is important to know the market conditions and ensure that your investment property stands out over all others when trying to secure a tenant.