If you’re tired of renting but can’t quite scrape together a down payment for a home of your own, you may need to get creative. One option is to purchase a property with a friend or relative.
Co-ownership makes it so much easier to buy a home as you’re able to share the down payment and monthly expenses. It’s a partnership you don’t want to enter into lightly though as there are pros and cons.
On the plus side, it’s much more affordable, so you’ll be able to start building up equity instead of constantly throwing your money away on rent.
The drawbacks, however, include a lack of privacy and the potential loss of a valuable friendship. You may like and trust each other now, but things could change once you start living together.
Determine first whether your personality styles are a match. If you’re a neat freak and your friend doesn’t know one end of a vacuum from the other, then problems may arise.
Also, think about how you like to spend your leisure time. If you prefer spending quiet nights at home, but they’re more of a party person who loves to host, it may not be a great match.
If you’ve determined that you're a good fit, the first thing you’ll want to do is visit a mortgage broker to get pre-approved and lock in the lowest rate to protect yourself in case they rise while you’re out house hunting.
Next, create a list of essential needs such as location and parking. Even small issues, like who’s getting the master bedroom, may create future tension so sort out these types of details ahead of time.
Finally, draw up a contract that addresses potential problems and spells out maintenance issues. This is a business deal, so discuss worst-case scenarios such as death or how to proceed if one person wants to sell, but the other doesn’t.
Building up your financial security through co-ownership can work well for both parties if you have an open line of communication before, during and after you buy a home. A solid plan will help eliminate future problems so you can enjoy the benefits of co-ownership while remaining friends for life!