As the Great Australian Dream of home ownership continues to evade many, particularly in capital cities such as Sydney where housing affordability is a major issue; an increasing number of first home buyers are teaming up with a close friend, colleague, relative or partner, as a way of getting their foot on the property ladder. You may have watched Network 10’s Five Bedrooms – it was a light-hearted Aussie drama using this premise as its narrative…but, it is actually also happening in real life.
With an increasing number of ‘dual key’ properties being constructed, and many savvy sellers converting their homes to dual living – the practicality of co-buying is enhanced, if a property is designed for fully self-contained cohabitation.
When buying a property with other people, you will need to seek quality legal advice, prior to signing a contract…everyone needs to enter the agreement with their eyes wide open, aware of the risks in the event of something unforeseen occurring to fracture the partnership.
The right ownership structure needs to be determined, and there are two main options, joint tenants and tenants in common.
Joint tenancy is most commonly used by couples and people in longer term relationships. Under this form of ownership, all joint tenants have equal ownership and interest in the property. A right of survivorship also attaches to this form of ownership meaning that if one of the joint tenants die, the property will automatically pass to the surviving joint tenant, irrespective of any provisions in the will of the deceased.
Tenancy in common differs in that each person owns their own share of the property in equal or differing sizes, so it’s a good option if you’re purchasing with someone other than your spouse, or if you and your partner have children from a previous relationship to whom you wish to leave your assets in your will.
If done right, co-purchasing a property can open up several opportunities, including the opportunity to buy in a more desirable suburb due to a combined borrowing power, saving the deposit faster and without as much personal sacrifice, and sharing household expenses.
Buying a property is one of the biggest financial decisions you will probably ever make, if contemplating buying with others, make sure you seek legal advice and have an air-tight agreement in place. Good luck.