Could You Buy Real Estate with Someone?

As the price of real estate has skyrocketed over the past few years, the possibility of owning a home is getting pretty slim for many people. Here in Vancouver, even though prices have dropped, a one-bedroom condo is around 300K. You need to make a fair salary to be able to afford that or you’d have to save a fairly large down payment. Forget about detached houses – with the average price of a house soaring, it would take a small financial miracle to be able to afford one.

So why not buy with someone else, as the article I link to suggests? With more than one income, you’ll be able to afford that palace you’ve always wanted. I’m not just talking about buying with a loved one, I’m talking about buying with a friend or family member. Doesn’t it make sense to buy with someone you really like and get along with or are related to?

In theory it sounds great, but issues of money can test even the strongest bonds. It’s important to have a well thought out arrangement beforehand to help avoid any issues in the future.

LEGAL

How do you split up the expenses? What if one party brings more ‘money to the table’ than the other party? What if one person wants out and the other one wants to stay? These are some of the issues you’re going to have to consider if buying with a friend. A trip to the lawyer would be wisely recommended.  I can’t imagine only agreeing to terms orally and then a few years down the road, problems come up. If you don’t have a document to fall back onto, I could see big trouble.

Here are some items to consider:

• Major repairs and maintenance – how to split this up.
• The percentage of ownership – based on how much money each party puts in.
• Exit strategy – the other party should get ‘first refusal’ as the article points out. If one wants out, the other can purchase and remortgage on their own.

DAY TO DAY LIVING

You’d also better make sure you divide up the daily duties of running the household. What happens if you get one person who is a clean freak and the other who really isn’t that clean at all?  You need to have a list in place of what gets cleaned and when.

What if the other starts dating someone and this new person is around the house all the time? Would you be prepared to have a third roommate? You’d have to specify in your ownership contract what happens – would they have to start paying part of the expenses? Would they also have any right to a share of the house? I could see it getting messy, if the relationship becomes common law.

A REAL LIFE EXAMPLE

Friends of mine actually did this and so far so good. A few things have come up:

Utility bills – one has had to carry a few bills while the other gets the money together. Ultimately, everything does get paid though.

Decor – one likes traditional, the other likes more modern and the house is a heritage type house. They don’t always agree on what’s best for the house.

Relationship – a third person is around now – quite a bit … but it seems to be working so far. Should they pay a portion of expenses? That one is still up in the air.

Major Repairs – which ones to do first? There is some disagreement over what is best for the house - cosmetic or maintenance?

At the end of the day, I would consider buying property with someone besides a loved one, but NOT without some kind of extensive agreement is writing.

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