Is it wise to buy property with family or friends?
Due to the growing unaffordability of many Australian property markets, many are turning to alternative means of purchasing property, including co-buying and rentvesting.
While buying a property with a close friend or family member may appear to be a great idea, it could also be a source of significant strife down the road, warns a new study from GlobalX, a Brisbane-based provider of legal and conveyancing workflow solutions.
The company surveyed 170 legal professionals, and 45% have recommended that buyers avoid purchasing property with family or friends.
Peter Maloney, CEO of GlobalX, said strategies like co-buying and paired rentvesting could be damaging in the long-term.
“Co-buying allows buyers to split the cost of purchasing a property, making it popular with first-home buyers struggling to save for a deposit,” he said. “It means that buyers enter the property market sooner, increase their buying power, and reduce their financial commitments – but when it doesn’t go to plan, can rupture friendships and ruin families.”
Maloney said he wasn’t surprised by the survey’s findings, as lawyers and conveyancers often witness property disputes first-hand.
“Legal professionals are the ones on the front line when things turn sour – they witness the disputes first-hand when plans change, and when friendships fall out,” he said. “These findings highlight that, as with any property purchasing decision, it’s important to seek professional advice on your specific situation before entering into a contract.”
Leonie Jarrett, solicitor and principal of First Class Legal, said many legal professionals were sceptical of co-buying, having seen countless relationships damaged after deciding to invest together.
“It’s common for relationship dynamics to change as time goes by, such as one buyer getting married and wanting to sell the property to purchase a family home,” Jarrett said.
“If the other owners want to hold onto the house, their only option is to buy out the other person’s share of the property, which they may not be able to afford.”
Malcolm Gunning, president of the Real Estate Institute of Australia (REIA), said buyers were looking for strategies that would help them enter overpriced housing markets sooner.
“Buying a first home is a big milestone, and with the rising cost of housing, it’s no wonder people are being inventive about the ways they can make it happen sooner,” Gunning said.
“But, like any thorough due diligence, it’s important that all parties are clear about their expectations of the sale, including how costs will be divided if things turn sour, and put this in writing from the start.”
“It’s easy to get caught up in the excitement of purchasing a property and assume that it will be smooth sailing – but property is a long-term investment and a lot can change five or ten years down the track.”
This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.