Is Buying Property With Sibling a Good Idea?
People have bought properties with siblings in the past and it is something they do even today. Big deal! Is it not a nice way to accumulate equity, fetch rental income and live free of cost as an owner-occupier at the same time? So, what should your life and situation be like to come out a winner from this co-ownership agreement?
Buying properties with siblings
If you are not good enough to start property purchases on your own, you try it with a friend or family. Simple! The problem with friends is that certain lifestyle-changes can make them different people overnight. When you buy property with siblings, you more or less know what you are getting into.
If a sibling passes away
Of course, the agreement may not turn out to be a smooth one all the way. For instance, there can be an acute problem if one of the siblings dies and his percentage of the property is passed on to a beneficiary (different from the second sibling co-owning the property) who has different ambitions about the property than the sibling who survives. In such cases, arriving at a proposal for equitable rent figures and purchase price can be difficult.
Lenders seek stiffer mortgage
When siblings buy a property together, the lenders, in more cases than not, assume costs based on the income of the higher earner (of the two). This can make mortgage rates a little stiffer than the case would have been had the lesser-earning sibling bought the property alone.
Co-ownership agreement
Look deeply into the co-ownership agreement. Have you set up separate mortgages for yourselves? This can be a trouble if one of the siblings opts for a seller’s mortgage and the seller defaults in due course of time. The other sibling then, for no fault of his/hers, may find difficulties in procuring actual home ownership even after the mortgage tenure is over.
It is no mean a figure that over 67% of Aussies are keen on buying properties with their partners, spouses, siblings and friends. Not a bad idea then to conduct your bit of Due Diligence!
What has your experience of buying property with your spouse, sibling or friend been like?
