Buying a home with Friends, Yay or Nay?

Well, it’s no surprise that buying a house in New Zealand is expensive. Particularly in Auckland, which is where the majority of the population lives while they’re trying to get on the property ladder, Many millennials (and even Gen Z-ers) have been forced to live at home longer than their parents did ( or want them to) or to rent eternally. Getting a house and making the leap to homeowner is no easy feat. This is why more and people are exploring alternatives, one of which is buying with friends. We’ve seen it work with clients of ours, and now these families have moved on into homes of their own.

Buying a home is expensive and almost always requires two incomes to make it happen. In New Zealand, the average age for buying a house is 31-34 years old. So, if you’re going to be living with other people to the age of 34, whether they are family or fellow renters, why not do so in a way that enables you all to get on the property ladder.

What are the potential risks?

Obviously, as it goes in life, there are risks involved with anything worth doing, but it’s better to know the risks to be as prepared as possible.

This will test your friendship! If you’re building new, there are a multitude of “ideas” to consider and agree on. If you’re buying existing, it’s “just” an agreement on what to buy. Living together is one thing; owning property together is something else entirely! You have to ask yourself if you think both people are prepared to really make this work and are committed to maintaining the friendship.

Even though you may only own half of the house, you are liable for the entire mortgage. This means if something happens to your PIC (partner in crime) and for whatever reason, they can’t make the mortgage payment, the responsibility falls to you.

It’s not just the mortgage; your credit record will also be linked to this person. So be prepared to share this info with one another before committing to anything.

How can you make buying with friends a success?

Have a lawyer draw up a property sharing agreement. Yeah, you’re friends, but this is serious stuff that requires actual adulting. It can also benefit you both to include in the contract what would happen if one person wants to sell and the other does not. Get separate lawyers to create an agreement and then get each other’s lawyer to review.

Choose your fellow homeowner wisely, make sure they are in the right place to buy (and you are too).

Get clear on expectations and create a plan together. What will you do for the home maintenance costs that inevitably pop up? Put this in the agreement mentioned above! What are everyone’s power and heating consumption behaviours?- Maybe one person wants to invest in the house to lower energy bills, talk it out. Is this partnership merely to get on the property ladder, or are you wanting to live with this arrangement for the foreseeable future? If so, what alterations are needed and wanted?

Remember, this is peak adulting; make sure you really think and talk this process out and are on the same page with everyone involved. Write a “business” or “living” plan, show this to an independent party, and for the sake of your friendship, GET A LAWYER!

And if you are considering a new HEALTHY home, get an experienced, quality designer. Ahem, don’t worry, we know someone…