24 Mar What to look for when buying property with friends or business partners
It would seem that everyday we’re hearing and reading stories in the media about how difficult it is for people to buy property and that the only way you can actually get on the property ladder is to either be given a large sum by a family member or to have one, or both of your parents act as a guarantor on your property. If you don’t have either of these things they’ll find it difficult. That doesn’t even allow for those on low incomes who simply cannot save for property due to the low amounts that they earn and the high cost of living in cities such as Melbourne or Sydney.
There are of course some different ways that you can get onto the property ladder and ways that you can do so without breaking the bank or requiring you to sell your soul to the devil, so we thought we’d let you know what they were so that you can decide whether or not they’re right for you.
You could buy a property with your friends but that could lead to friendships falling out and breaking down. It’s one thing to live with your friends in a flatting situation but it’s another all together when you’re mortgage holders. What if one person has a bigger room? What if one person has a more stable or higher income? Are you going to buy in the area that the low income earner can afford or will you buy in the premium area? If you buy in the low socio-economic area then the high income earner could feel resentment and wnat to get out of the mortgage when they have enough equity to do so. If however you buy in the more expensive area then you’ll have problems over who has the most power. The person with the higher income will potentially pay a larger chunk of the mortgage or a higher deposit, which will lead to a power struggle and that can cause the relationship to break down.
If buying a property with your friends or family doesn’t appeal to you and you’d rather not, then don’t lose hope, there are other options available that can help you get into your own property and they can give you more independence. One such scheme is a rent to buy scheme. A rent to buy scheme is exactly how it sounds. You pay your rent to the landlord, who in this particular case will be the vendor as well. Instead of paying the standard market rent, you’ll be paying slightly more and it goes towards owning your own property. These schemes can be helpful because they’re basically another way for a home buyer to get their deposit together however if the sale falls through you could end up losing money in which case the rent to buy scheme will have failed. If you or the vendor decide not to proceed with the sale then potentially you’ll lose any money you’ve spent towards the property purchase. That could cost you thousands of dollars.
These are just a couple of alternatives to getting into the property market if you’re struggling to save a deposit.