Think long and hard before partnering up with a friend to buy a house.
In a real estate market as crazy as the Toronto’s – the average price of a house hit $838,000 at the end of 2019, up 12 per cent on the previous year – it’s no wonder younger people are looking for alternative ways to get a foot on the property ladder.
CBC News reported on a Toronto real estate agent who tutors prospective buyers on how to team up with family, friends or even strangers, to buy property jointly.
“People go on the dating websites and you meet with a total stranger and supposedly those are very successful and people do end up marrying or being partnered with them. So could we do that with housing?” she told the news outlet.
Meanwhile, Vice News found a group of six friends – ranging in age between 28 and 38 – who got together to purchase a $1.3-million detached house in Toronto’s Little Portugal neighbourhood after securing a mortgage from a smaller financier with specialized products aimed at co-owners.
One of the buyers told the magazine she hoped others would follow their non-traditional approach, adding that the experience had paid off for them all, and that it was worth the extra work to find a willing lender:
“Some of it is prejudice against things that are different,” she said. “Our society privileges traditional family units in so many ways. Some of those barriers are actual policies but others are attitudes.”
I have acted for a number of people in co-ownership agreements, and while the idea is great in theory, the trouble is it’s hard to predict how the lives of those involved will change over time.
People think their values are aligned, but as the years pass, they realize they’re not quite on the same page. One may want to go off to have a family, or another may see the venture as more of an investment property.
To reduce the risks associated with a joint purchase, potential co-owners need to take it slow and be open with one another about their hopes and aims for the future.
A binding agreement governing the relationship is vital, and the more specific you can be about the terms, the better.
Amongst other things, the contract should cover the amount each person is putting in, and who owns what percentage of the property,
But don’t forget about ongoing concerns around the management of the property once it’s bought. You may want to create a pool of funds to cover regular or unexpected maintenance and repair costs, and stipulate who will be responsible for getting necessary work done.
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