Buying property with friends or family: What you need to know

Buying property with friends or family: What you need to know

Buying property with friends or family can open doors that might otherwise feel out of reach. By pooling resources, buyers can secure a larger home, a better location, or even start building a property portfolio sooner than they could alone.

Co-ownership not only offers financial advantages but also shares responsibility, making it easier to manage costs and maintenance while building an investment that grows in value over time.

Success depends on careful planning. Setting clear agreements upfront on ownership shares, monthly contributions, and decision-making helps ensure everyone is aligned. It’s also important to decide in advance how a future sale will be handled to avoid complications. With the right structure, co-buying can be a powerful way to step into the market, enjoy the lifestyle benefits of property ownership, and create long-term wealth together.

While co-buying can be a smart way to get onto the property ladder or invest collectively, be advised that it requires clear agreements and careful planning to avoid future disputes.

Pooling resources can make a property purchase possible that none of the buyers could afford alone. But you’re entering into a long-term financial and legal relationship. It’s vital to get the structure right from the start.

Clear legal structure

The first step is deciding how ownership will be recorded. You can buy directly in individual names, but often a better approach is to register a legal entity such as a company or trust. This makes it easier to define each party’s share and exit strategy.

A formal co-ownership agreement is essential. It should cover cost splits, what happens if one party wants to sell, and how major decisions are made. Skipping this step can turn small misunderstandings into serious disputes.

Financial transparency

Each buyer’s financial position should be considered upfront, including credit history and debt levels. If you’re applying for a joint bond, the bank will assess everyone’s credit profile. Poor credit from one party could affect the loan terms or even approval.

Full transparency regarding affordability and ongoing contributions is key. Everyone must reliably pay their share of the bond, rates, levies, and maintenance. If one person defaults, the others are still legally responsible.

Long-term exit strategy

Life circumstances change, and co-owners may want to sell, move, or cash out. Your agreement should set out how to value the property and buy out a partner’s share, or how to sell and divide proceeds. Clarity here avoids delays and legal costs later.

Insurance and protection

Homeowners’ insurance should list all owners, and life insurance can be a wise addition. If one partner passes away unexpectedly, life cover can help settle that share of the bond rather than forcing a sale.

Relationship dynamics

Co-buying is not just a financial partnership but a personal one. Even close friends or family can find property decisions emotional. Good communication and legal clarity help keep the relationship intact.

Final thought

Buying together can unlock opportunities, but it’s not something to jump into casually. If you put the right agreements in place and go in with shared expectations, it can be a powerful way to invest and build wealth collectively. 

With careful planning, buying with friends or family can be a strategic way to step into the property market, enjoy lifestyle benefits, and create long-term wealth together.

Extract from Property 24