If you are thinking of getting on the property ladder but are still not ready to take the plunge yet, it may be worth it to consider investing with a friend or family member. Let’s look at some of the pros and cons of investing with another person.
- Your Deposit
When you invest with a friend you can each save half of the money (or less if you invest with a group of friends) for the deposit. This can help you buy a place much sooner than you would otherwise be able to.
- Your Expenses
Buying a house is not cheap, and neither are the monthly payments and expenses. Once you have saved all of your money for the deposit, you still have to pay for maintenance, rates, and your mortgage repayments. By sharing with a friend or family member, you don’t have to take on all that stress yourself. This could be especially beneficial if you plan to do some renovations before renting it out.
- Home Equity Gain
Depending on what your goals are, you and your friend may not own property together forever. If you eventually, one day down the road, decide to go your own way you can sell up and split the proceeds. Compared to renting, where you give your notice and move out, if you have been smart with your investment, you will more than likely sell up (or one partner may buy the other out) and take your profits to put a down payment on a new property.
The number one factor that may put people off investing with their friends is the possibility of disagreements. Most people have arguments now and again but, depending on the nature of your friendship, it depends whether you can put your friendship aside when it comes to business decisions. It could be that one partner wants to spend more money on the property than the other, or even arranging maintenance or repairs without first discussing it. When going into a business partnership with anyone, family or friend or even a business acquaintance, it is always a good idea to draw up the necessary contracts and agreements so both parties are aware of who is responsible for what and what and what to do when conflicts arise.
- Everyone is liable
When you have a joint mortgage, everyone is responsible. You may always make your payments every month but if your friend is not good with money, they may fall behind leaving you liable for the payments. The key here is to have good communication lines open at all times and to be upfront about any possible cash-flow problems.
Would you ever invest with a friend?