Buying a house with a friend can be a great solution to Australia’s affordability woes, but how do you do it properly?
Take a test run
If you both plan to live in the home you buy together, then you should at least try to live together for a while first. Why not move into a furnished apartment on a 6-month lease as a test run? If you can find a place where the rent will match your anticipated mortgage payments, you can get a good sense of whether either of you can actually afford to buy, as well as feed yourselves and make the necessary sacrifices to be financially stable.
Lay your cards on the table
Buying a property is a big financial commitment, not only because of the decades of monthly repayments, but also the responsibility for the ongoing expenses involved in running and maintaining the property. You and your friend should spend some time going over your finances, being as honest and open as possible about your own expenses, spending, savings and debts. Drawing up individual budgets is a good exercise to learn exactly where your money goes. Discuss what your current budgets are and how they will have to change to manage the new expenses you will both be committing to.
Map out the future
Once you’ve decided that you can buy a house together, it’s important to plan ahead and have a clear understanding of what you both want. If one of your longer-term goals is to be in a relationship and start a family, then it’s safe to assume that will happen during the course of your mortgage. Plan what this might look like and be clear about how this will be navigated if and when the time comes. Sketch out solutions, so that you can then get legal structures put in place to secure these decisions and protect you both.
Cast it in stone
Once you have explored all the possible scenarios, a mutual investment in professional advice and structure is essential. See a real estate lawyer who can help you draw up things such as a co-ownership agreement. This will clearly detail what happens if one of you wants out, if one of you dies or if the relationship deteriorates; plus both of you will need to update your wills.
Buying a property with your best friend can be a fantastic experience. With precautions in place that anticipate most scenarios, you will both be able to reap the benefits of your shared investment, and experience a deeper level of friendship as you enter into a new kind of partnership together.