Co-Ownership is a great way to get into the Real Estate market with your friends or family members.
The Real Estate market is getting harder and harder for first home owners to crack into.
Talking just about the Australian market, we are seeing massive jumps in property values each week, and purchaser demand is so high that properties are selling in days! To add to this pressure, we are seeing unforeseen low interest rates and massive incentives available through the government.
But this shouldn’t deter the savvy First Home Owners out there, and there are some clever ways to help get a toe in the door. Co-Ownership is a great way for a group of people to leverage themselves into the market.
Okay, sounds great! How does Co-Ownership work?
Easy! Co-Ownership is simply two or more people choose to purchase a home together.
The most common arrangement is when two partners choose to purchase together, but there is no need for the two parties to be in a relationship or to be related for Co-Ownership to work. You can own a home with anyone!
In regards to the structure of Co-Ownership, there are two main joint property ownership options in Australia.
- Tenants in Common
- Joint Tenancy
if you’d like to read up on the legal jargon in detail, click here
As a TL;DR
Tenants in Common structure means that each party has a percentage share in the ownership of the property, and each party can transfer their share of the property to whomever they please in their will.
Joint Tenancy gives each party equal ownership in the property, and each share is passed to the sharing parties only.
To find out more about the percentage splits or which option would work best for your sitaution, chat to your Solicitor or a Property Lawyer.
Sounds like it could be an option, what are the advantages?
So glad you asked.
The biggest advantage to this structure is it costs less, as an individual, to get into the property market.
You can split the upfront costs of homeownership between the parties, as well as the loan amount! As you are joint owners, all of the costs of maintaining the home are split between the parties as well, including the Rates, Usages like water and power and any maintenance or upgrades or the home.
This of course makes it a lot easier to get into the market and become a homeowner.
So it lowers the entry costs? Great! What about the disadvantages?
There are pro’s and con’s to every decision, absolutely.
The biggest one with Co-Ownership is you have shared responsibility and liability with another party. Make sure that whoever you choose to purchase with is on the same page as you when it comes to expectations and commitments to the purchase and the property itself. Disagreements can happen between friends or family members, but if they occur in regards to the property or the purchase, make sure expectations are transparent.
All parties have to agree on what happens to the home (like renos or use of the rooms etc.), and all parties need to make sure all financial obligations are clear before any decisions are made.
Make sure you have received advice from your Solicitor before you agree to any commitments!