As average home prices keep climbing, you and many other homebuyers looking to get in the market over the next two years may be considering co-buying with friends.
Despite houses across Canada hitting an average of $508,567 in March, a 15.7 per cent spike from March last year, the volume of homes set an all-time record with 41,357 changing hands via the Canadian Real Estate Association’s Multiple Listings Service.
And Canadians don’t have any plans of shying away from the red hot markets with 43 per cent of 18-to-24 year olds saying that they are considering purchasing a home in the next two years.
In fact, one in four millennials say they’d consider buying a home with a friend.
While co-buying can seem like a good solution to these challenges, it’s not without its own set of logistics, some of which may be more of a concern for friends purchasing together compared to a married couple.
You have to be up front and have a very transparent communication with each member with the most important buying factors. For example what is most important, is it location, investment, selling, etc.. These are massive considerations and open communication will help make sure all involved are on the same page!
You don’t want to be down to the wire on making a bid and realize you have a huge discrepancy in what’s important to each partner.
Since you're building what is the most important foundation of your partnership all sides must be on the same page.
The most important starting point would be to for each stakeholder or partner consult with a licensed mortgage professional to ensure their purchase price and obtain a TRUE pre approval, especially if a mortgage is required. It's key to work with someone who can work together on your plan and understands your true goals and is willing to work on a plan with you.
Use this time to review finances and then lay out everyone’s credit scores, monthly income, down-payment portions, extra savings accounts and retirement funds. Transparency is vital.
At this point you create your partnership, all the goals, financial commitments – who contributes what to the down payment, to the mortgage, to real estate taxes and home repairs – as well as how to resolve any disputes that may come together surrounding maintenance costs and put it into a legal document.
An exit strategy is highly important as you want to consider who is responsible for what if something were to happen or one partner were to lose their employment.
Some other key considerations are:
- What happens if you have different goals? Things change, maybe one partner gets married or have kids – are you flexible enough in the partnership?
- And what does that look like?
- Does one person buy the other person out?
All these considerations need to be kept in mind and written down on paper in legal document form.
Open dialogue is very important!
If you're thinking of buying with a friend make sure to touch base and we can help guide you in the right direction and build a plan as we have plenty of experience working with clients who have done just this in the past!
Call us at 604-619-3319 or e-mail us anytime!
Excerpts from original Article by Andrew Seale on Yahoo Finance