Young people frustrated at being priced out of real estate opportunities are turning to a strategy of co-buying to get their foot in the market.
It’s an increasingly popular approach when the “Bank of Mum and Dad” cannot close the gap between a young person or couple’s income and loan obligations.
Co-buying doesn’t come without its risks, of course.
What happens if your partner in this enterprise can’t pay their share, or tries to walk away and leave you with the burden, putting your own investment in jeopardy?
Before you rule out co-buying, the truth is any shared investment has its upsides and downsides.
For example, when parents help with a mortgage, they either put their own money on the line or make a bank guarantee. But what happens if their son or daughter doesn’t want the property any longer, or they find a partner and make different life plans?
In all these cases, a legal agreement is critical to protect everyone’s interests.
When co-buying, a comprehensive co-ownership agreement is essential to outline each party’s rights, responsibilities, and exit strategies.
Here are some of the other issues to consider when co-buying:
Money talks: Thorough financial planning, including budgeting and contingency plans, is crucial.
Communication: Honest communication among co-owners is vital to prevent conflicts.
Get advice: Seeking advice from legal and financial professionals is highly recommended.
By carefully considering the following pros and cons, individuals can make informed decisions about whether co-buying is the right option for them. There are several benefits to co-buying. So, while the advice is one of caution, here are some of the upsides:
Increased affordability: Sharing the down payment and mortgage payments makes homeownership more attainable, especially in areas with high property values.
Financial strength: Combining incomes and credit scores can improve loan approval odds and potentially lead to better interest rates.
Shared expenses: Splitting costs for property taxes, insurance, maintenance and repairs can significantly reduce individual financial burdens.
Investment potential: Co-buying can be a strategic investment, allowing individuals to diversify their assets and potentially generate rental income.
NOTE: The information in this article is general in nature and provided as a market overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.