Buying property with a friend

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Photo: Mike Baker

I didn’t plan to grow up to be thirty-five, single and living in a share house. Like many kids growing up in the suburbs I assumed I would grow up and buy my own home. That was before property prices went insane, the GFC happened and my long-term boyfriend turned into an ex. Things did not turn out how I had hoped they might but for years I lived in rented share houses stroking the remnants of my childhood assumptions.

It wasn’t until my last landlord defaulted on his mortgage, and the sheriff showed up on my front door, that I said to hell with it and made the decision to kill the great Australian dream of a house, a car and a spouse.

After my landlord’s house was repossessed by the bank I was thrust back into the madness of the inner city rental market and hating every second of it.  And it is madness. Don’t let anyone ever try to tell you that paying over fifty percent of your salary for a room in a share is a good idea.

It wasn’t just the obscene cost of sharing with two other people I objected to. Renting always feels temporary, no matter how long you stay in one place. The house is not your own and there is never a moment you are allowed to forget it. Seeking permission to hang pictures, plant vegetables and even keep a bike in the shed,  being subjected to quarterly inspections and knowing at any moment a letter could arrive asking me to leave was daily reinforcing the place I called home was not my own. I needed to find a way to get out of the rental market.

I’ve heard of siblings teaming up to buy a house together so why not friends? First I had to set aside some time to put the dream to sleep. I thought laying aside the original plan of growing up, finding The One and buying a house would be difficult and heart wrenching. That I would spend months, even years, wallowing in a miasma of failure and discontent but as it happens it is a lot easier to let a particular hope die if it opens up a shiny new future.

The more I thought about it the stupider it seemed to delay. Why should I miss out on the stable and wealth building option of owning my own home? Surely I’m not expected to live the poor and dependant life of a spinster character from a Jane Austen novel?

I knew my friend Ben had been thinking about buying a place for a while, he had a substantial deposit and a steady income but more than his financial particulars I was confident I had a good measure of his character. Sure Ben is messy, grumpy, handles stress by becoming grumpier and has been accused of being aloof but that’s the worst he gets. I also know the good parts of his character.

I proposed buying a house together over a beer. It took him about two seconds to say yes. He said he was sure he wanted to buy a place and escape the rental market, but not sure he wanted to do it alone.

Ben, like me, found himself single and living in a rented share house in his mid thirties. He was in a new relationship, but as most of us have learnt the hard way, relationships are not a gateway drug to the real estate portfolio of your dreams.

I was worried about telling my friends and family I had decided to buy a flat with a friend. My parents have always seemed vaguely disappointed that I remain steadfastly single while my younger brother has married and is planning a family. To my surprise not one person had a negative thing to say about our plan. Absolutely everyone agreed it just makes sense to team up and buy place with a friend.

I’m not living the life I thought I would when I was child but then again as a child I also promised myself I would ride a pony to work, wear only pink shoes and invent a new kind of laser gun. It took me a while to realise it that holding on to how I thought my life would turn out wasn’t doing me any favours so I took a look around and tried to see what else might be possible.

Signing the papers for our flat that we own together, in good will and friendship was precisely the landmark it should have been. In fact I felt proud and happy and compelled to perform a tacky high five.

 

34 comments

  • Spot on, I've been thinking about this for the past month or so, and now that I've read this it made even more sense. I'm glad I'm not the only one out there with a bit of left of center ideas. Enjoy your new place Emma, good on you!

    Commenter
    Karlito
    Location
    Melbourne
    Date and time
    September 17, 2013, 9:36AM
    • Just be careful and get good legal advice first in case s**t turns to clay. It's not as expensive as it sounds and may save you in the future. I was even told to do this when looking at buying an investment property with my brother. Just have everything in writing and cover your butt. You never know if you may fall out with the other person and how nasty it can get.

      Commenter
      Anne
      Date and time
      September 17, 2013, 11:19PM
  • for a second there, i thought we might have stood a chance.
    'A masterful strategy or the stupidest idea you ever had?'
    this piece describes no 'masterful strategy' aside from,
    'hey, real estate prices are so chronically overinflated that i can't buy a house and my own landlord even defaulted on his giant mortgage, but you know what?
    renting is even worse so i need to find a way to buy buy buy now!'
    so, why not enter a complicated life-long legally binding contract with one of your 'friends'?
    you'll be able to hang up pictures and plant vegetables in the garden!
    what could possibly go wrong?
    this property bubble has gotten so out of hand and first home buyers are so priced out of the market.
    to maintain the status quo and to keep the bubble inflated, the industry must find subversive ways to change the publics perception to what is acceptable. thats all this piece is. and thats all the 'real estate' sections of these papers offer. spruik.
    just add it to the growing list of suggested 'modern life solutions', like asking your parents for money or using a negatively geared outer suburb 'investment' property to subsidise your inner city rent. this is disgusting.

    Commenter
    jess
    Location
    perth
    Date and time
    September 17, 2013, 10:06AM
    • Hang on, fools were priced out because they waited many, many years hoping prices would halve. C'mon, that was never going to happen. Then suddenly, demand outstrips supply, rates are low and prices are now flying up. The UK is also recovering. I never believed it for a second and to prove it, in the middle of the GFC I bought an off the plan apartment in the city. I paid $490K for a 2 bedder, 2 bathroom with secure parking. That's isn't much considering now the rent is about to hit $700/week and its only been completed for 15 months. You can negotiate a 5% deposit if you don't have the 10% or if needed I could have used my own home but didn't need to. Now do the sums. Repayments = $2200 month (we upped the loan a bit to buy another off the plan by the beach - cant wait). Rent brings in $2800 month. People on here were so bitter, calling me an idiot and I'll lose out. I could sell it tomorrow for 720-750K (just had it valued). Does that sound like an idiot? One of you bitter renters will find a reason to call me one but I'm the one laughing...and buying. I can sell it and pay my own home off before I'm 40. Yes, I'm feeling terribly stupid. You aren't out priced, you're just too thick to figure out how to buy. get an advisor. My kid isn't yet 19 and half way to his first investment property deposit. He will still live at home, rent it out then keep buying, keeping them in the name of a family trust so no gold diggers can touch it. Mum arranged that, I'm very strict on that.

      Commenter
      Anne
      Date and time
      September 17, 2013, 11:37PM
  • Oh go away---kids have been doing that in expensive places forever.

    Commenter
    Kane
    Date and time
    September 17, 2013, 10:22AM
    • I wish you the very best of luck but I really hope that a lot more thought has gone into this than is written about in the article. It isn't clear but I am assuming that both parties will be living in the new house. What happens when one wants to renovate and the other doesn't? What if one wants to move out and the other doesn't? What if someone wants to sell to move into their own place, and the other doesn't and can't afford to buy the other out. These are but a few of the questions that should be answered before you buy a multi hundred thousand dollar asset with someone, particularly when you are both presumably taking on a lot of det in order to do so.

      Commenter
      Hurrow
      Date and time
      September 17, 2013, 10:53AM
      • All excellent questions.

        More:
        What if one is paying more of the mortgage than the other? Do they get more of the proceeds upon sale?
        What if one loses their job for an extended period and cannot pay the mortgage and you cannot cover their portion?
        What if one finds the magical relationship and want to move out and sell but you don't?
        What if one undertakes more improvements to the property? How do you value such things without the complications of a qualified valuer?

        I'd recommend that instead of trying in the inner city you move to somewhere that was affordable. An article published on domain.com.au just last week showed there were dozens of suburbs where median price for houses was under $500k. Some as low as $300k. All in Sydney and Melbourne.

        You're not going to get the terrace in Paddington/Newtown that you want but you'll get something that is far better than renting (which is dead money).

        Commenter
        Bender
        Date and time
        September 17, 2013, 2:11PM
      • renting is no less dead money then the interest on a mortgage.

        Commenter
        poseidon
        Date and time
        September 17, 2013, 2:47PM
      • Interest on a mortgage is a necessary evil which reduces over time as you pay off the loan.

        Not owning your own home will have disastrous consequences later in life: http://www.news.com.au/realestate/renting/ask-the-property-professor/story-fndbatbk-1226534460846

        You won't be able to continue to rent when you are retired and no longer on the same income as when you were working.

        Commenter
        Bender
        Date and time
        September 17, 2013, 8:44PM
      • Poseidon, you're the perfect example of a bitter renter who can't buy because you can't budget. A mortgage is a 30 year loan. It can be paid in ten years if both partners work and you hammer the mortgage. As I've written earlier, I'm not yet 40 but can sell an investment property and pay my own house off in full but because I invest so intelligently in either the CBD and its surrounds off the plan so it's cheaper, the rent I get just brings in way too much money and the value on my latest has gone up 100K a year from construction to completion. Our biggest problem is stupid tax so we have to keep buying using the positively geared properties to buy more to avoid the pitfalls of paying tax on them. Now we'll just pull cash out of the properties and put it on our mortgage so they're negatively geared and the taxpayer can keep giving me BIG returns. I'm not giving the govt money because I made good decisions. They should be paying me for providing the housing they can't. It's dead money if you're a moron and only pay the minimum payment, just like a credit card. Just pay the minimum and you'll never pay it off. Pay double and you're right. I live in western Sydney, across the road just rented for $650/week. Lets say you're 30 for arguments sake, when you retire at 70 (that's in 40 yrs. Sorry you don't seem bright with numbers). By then rents will be $3000 week if not more. There will be no pension. I hope you're putting all your pay into your super or saving for a nice air tight cardboard box to live in. Dead money if you're a dead head.

        Commenter
        Anne
        Date and time
        September 18, 2013, 12:00AM

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