Is share-buying property the answer?
I recently had an interesting conversation with an old client. Her son and daughter are both in their early twenties and are considering buying an investment property together. They live in Sydney, can’t afford to buy singly but want to start now, as a forced savings plan and as a way of funding their far-off retirement. In a city as unaffordable as Sydney, it makes sense to get on the ladder sooner if possible, and siblings purchasing together could just be the right solution for some.
According to Mortgage Choice (in Oct 2015) they experienced a 6% increase in siblings buying together since 2013, making up around 6.5% per cent of all their mortgage holders. The increase in borrowing capacity with two incomes, as well as being able to combine savings to come up with a higher deposit (and possibly avoiding expensive lenders mortgage insurance) can certainly be a faster way to get into the property market sooner.
As with any purchase involving more than one party, however, it’s important to seek legal advice and have a co-ownership agreement drawn up to cover the “what-if” scenarios and have a clear exit strategy in place. The following questions really need to be considered:
What happens to the property if the relationship sours?
What happens if one party wants to sell?
Who is going to live in the property?
Will rent be paid if just one owner lives there?
Who will pay the bills/handle the financials?
It really is a cornerstone legal document for any investment property as it will set out roles and responsibilities of each owner and it will deal with other relevant issues pertaining to property ownership. Though there is much to consider, if done professionally from the beginning, with both siblings on the same page in terms of overall goals and strategy share-buying could well become more popular in a city as expensive as Sydney.