Property tips for teaming up to buy housing, and traps to avoid

Australia’s property boom is resulting people joining forces with others to buy and invest. Here’s what you should know.

Soaring property values are prompting a growing number of Australians to team up with friends and family members to buy real estate.

Parents have been helping children into property for generations, but more creative pairings are become increasingly common, say real estate specialists, but they warn there are potential pitfalls.

Buyers agent Michelle May is seeing the trend among investors, multi-generational families and first home buyers.

“It’s a pretty tough time to get your first foot on the property ladder, which is why in some instances, buying with someone else is a great strategy,” she says.

May says people who are open to exploring this option can consult a team of experts to ensure the process works for everyone involved – think mortgage brokers, buyer’s agents, conveyancers and lawyers.

Buyers agent Michelle May says it’s a tough time to buy property solo.

“Perhaps you and your partner have another couple you want to team up with or a colleague looking for an investment,” she says.

“Two friends could decide to buy together and split the equity. But with property buying already a pretty stressful and emotional process, things can get complicated with multiple parties involved.”

The benefits may outweigh the negatives and allow people to buy somewhere they previously couldn’t consider, provide more borrowing power and share running expenses and financial impact, May says.

Property Investment Professionals of Australia chairman Peter Koulizos says “50 per cent of something is better than 100 per cent of nothing” and he is seeing more friends buy together.

“But you have to be careful how you get into these deals because you want to make it relatively simple to get out,” he says.

While spouses typically hold investment properties as joint tenants, where if one passes away the other gets the property, other investment partners can use a joint tenant structure – where each owner has a separate interest – or a unit trust with only two units.

Koulizos recommends having written documentation about how the arrangement works and ends, perhaps with a five-year time frame before one partner can buy the other’s share.

“You need to work out your exit strategy before you enter into the agreement,” he says.

“Friends and relatives don’t necessarily make great business partners – they can be lovely to be around but may make poor business decisions or are not very good with money.”

Originally published as Property tips for teaming up to buy housing, and traps to avoid