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Option Homes Ltd - News- Should You Buy a House With a Friend?

Should You Buy a House With a Friend?

Date Added 11/04/2016

With house prices rising and deposits often an insurmountable hurdle for many people looking to get onto the property ladder, an increasing trend has seen many folks looking to join forces with a friend to purchase a property together. But is it a good idea and if so what are the issues you need to be aware of in advance before committing to such an endeavour? We`ll talk you through some of the main issues you need to consider.

Agree a Plan of Action Together

You need to sit down with your friend and have an extremely honest and frank discussion regarding both of your financial situations. Both of you must be 100% aware of the other`s situation, what they can afford and what they are currently earning. You will also need to be aware of any required payments the other has to make, such as debt repayments or standing orders. You will also need to agree on every detail before even looking for a house, including the type of property, the area it is in and the price you are willing to pay for it.

You will also need to figure out exactly what kind of shared ownership deal you want as there are different kinds. One option is to own the property completely together which means it cannot be sold or re-mortgage without dual agreement, while another option is that you each own a specific portion of its overall value (known as a ‘tenants in common` agreement) with each portion able to be sold individually.

Plan for the Future Now

You should include a discussion of your future plans in your advanced talks. Get an idea of how long each of you intend to live with the other and in what circumstances would one or the other be willing or even eager to sell the property. Once you have everything out in the open and agreed upon, you will need to draw official documentation of everything (literally everything) so that there are no issues in the future with regards to failing memories or misremembered verbal agreements. This is to protect your friendship as much as it is to protect your financial interests.

You should also prepare for the worst, such as one of you losing their jobs unexpectedly or simply one of you having a change of mind and wanting to sell up before the other one wants to. It would be wise to consult a solicitor and have them draw up a co-ownership contract in advance which includes details of what steps must be taken in the event of any or all of these potential problems.

Additional Issues to Consider

Once everything is agreed and legally binding, you`re ready to move in with each other. Now, it would obviously be a good idea to rent a property together first to adapt your life styles so that you know you are compatible, but if that`s not possible then draw up some house rules you both agree with. Forget you are dealing with a close friend when doing this and imagine you are inviting a random stranger to come live with you. It`s also a good idea to draw up an inventory of the all the items in the house with regards to what belongs to whom.

Overall, you must go into this kind of deal with the long-term view. So make sure you choose a good property in a good location so there is plenty of opportunity for price growth and resale value. Alternatively, you may both hold onto the property after moving out and then rent it out to new tenants to continue bringing in money on your joint investment.
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