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With house prices continuing to rise, buying a property solo is becoming more challenging for many New Zealanders. As a result, more people are considering co-ownership with friends as a way to get on the property ladder. But is co-owning a property a smart move? In this article, we’ll explore the pros and cons of buying a property with mates, key financial considerations, and how to set up the right structure to avoid future disputes.
Why Buy a Property with Friends?
For many, the biggest hurdle to buying a home is affordability. Teaming up with a friend can help overcome key financial barriers such as:
Deposit Shortages – Combining savings means you may be able to reach a deposit threshold faster.
Loan Approval – A joint application can increase your borrowing power.
Property Quality – A larger budget allows access to better locations and higher-quality properties.
Shared Costs – Splitting mortgage repayments, rates, and maintenance expenses can make ownership more manageable.
While co-owning a property can provide a path to homeownership, it’s important to ensure that all parties are aligned in their goals and responsibilities.
The Risks of Buying Property with Friends
Although there are financial benefits, co-ownership also comes with risks, including:
Different Financial Situations – If one person loses their job or faces financial hardship, it can put pressure on the others.
Future Life Changes – One owner may want to sell while the other wants to hold onto the property.
Disagreements Over Property Management – Decisions on renovations, tenants, or selling can cause conflict.
Legal and Financial Complexity – Without clear agreements in place, exiting the investment can be difficult.
Setting Up a Successful Co-Ownership Agreement
If you decide to buy with friends, setting clear expectations from the start is crucial. Here are a few essential steps to protect your investment and friendship:
1. Get Legal Advice & Draft a Co-Ownership Agreement
Before signing anything, sit down with a lawyer to draft a formal agreement. This document should outline:
Ownership structure (equal shares or different percentages)
Responsibilities for mortgage repayments and expenses
Exit strategies if one party wants to sell
Dispute resolution processes
2. Discuss Financial Goals & Risk Tolerance
Having similar investment goals is key. Are you planning to live in the property or rent it out? How long do you intend to hold onto it? Having a clear, shared vision will help prevent future disagreements.
3. Take Out Insurance
Life insurance policies that cover each co-owner can ensure that in the event of death, the remaining owner(s) can buy out the deceased’s share. You may also want to consider income protection insurance to safeguard against job loss.
4. Structure the Loan Correctly
Mortgage structuring is crucial when buying with friends. You can choose to apply for a joint loan or individual loans secured against the property. Working with a mortgage adviser can help you find the best structure to suit your needs.
Key Takeaways
Buying property with friends can help overcome financial barriers but requires careful planning.
A formal co-ownership agreement is essential to avoid disputes.
Aligning financial goals and risk tolerance is crucial.
Insurance can protect both owners in the event of unforeseen circumstances.
Proper mortgage structuring can make the process smoother and more sustainable.
Next Steps
Thinking about co-owning a property? Lighthouse Mortgages can help you navigate the finance, find the best lending options, and structure your purchase the right way—get in touch today!
If you’d like to learn more, check out these other episodes below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
