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We all know property prices are rising.
That has been the case for a long time and will likely continue for a long time to come, which can make saving for a deposit harder.
So is it time to consider buying property with someone else?
The idea of purchasing property with anyone other than a spouse may set off alarm bells for some people. There is an expectation that property should only be bought with a committed, long-term partner because friendships and business partnerships can fail often resulting in a financial mess. However, there are ways to purchase property that limit this risk and can be tailored to suit individual financial situations.
In order to purchase property with other people, you first need to decide on an ownership structure. This will mean deciding whether to purchase the property as joint tenants or tenants in common.
Joint Tenants
Purchasing property as joint tenants allows for one person’s share to be automatically passed to the other upon their death. The most common example for this type of ownership is when married couples buy property. It is assumed in a joint tenancy agreement that each person owns an equal share of the property.
The most common example of joint tenants is a married couple.
Tenants in Common
The other option is to purchase property as tenants in common. The main difference with this type of ownership is that the owner’s shares can be allocated to whomever they wish upon their death by stating so in their wills. It does not automatically pass to the other owner like joint tenancy ownership.
This structure of ownership is therefore suitable for people who want to team up and buy property together for pure business or financial reasons, but don’t necessarily want their share to pass to the other owner upon their death.
Tenants in common do not have to have equal shares.
The other benefit of owning property as tenants in common is that the shares in the property do not have to be equal. For example, one person can own 60% while the other owns 40%. This is ideal if the two parties do not have equal amounts to contribute to the property.
Joint tenancy and tenants in common have their advantages and disadvantages.
Choosing an ownership structure will depend on a number of issues including finance, individual relationships and personal preference. It’s important to remember that buying property with someone doesn’t have to be an investment time bomb; it can actually be a great way to get into the property market.
– Peter “The Property Professor” Koulizos
