October 24, 2017
Is investing with friends or family a good idea?
In Sydney, It's tough getting into the property market. Even harder if you only have one income to rely on, this makes investing with friends and family a relatively attractive option. However there are some caveats to think of before you split ownership of a mortgage.
1. 100% debt for future purchases.
Most banks will asses your liability on the total debt rather than your shared value of ownership.
2. 50% yield.
In addition the banks will usually only consider 50% of the rental income from the property
3. Co-owner wants to sell and you don't.
circumstances change and life happens. People move, start families of their own, start businesses on their own, sell everything and live off the grid. Being tied to someone else's priorities may pose some difficulties in the Long run, should either party wish to sell.
4. Co-owners share credit rating on defaults depending on how loan is structured.
if either party defaults this may impact the other parties credit. Talk to us or your broker about how to best structure this
5. There are a few lenders that can apply a common debt reducer taking into account 50% liability. Dependent on a few things:
5a. owner occupied vs investment
5b. 80% or less loan to value ratio
5c. Living expenses of parties involved especially if there are dependents
6. Engage a lawyer
Some banks require it, we suggest it for good practise.
If this is something you are thinking about, we can assess your options for you and let you know the most viable solution. co ownership can be a great way to enter the market but you need to understand the potential risks.