How much money can I borrow for a home loan?
Considering buying a house or investment with family or friends? With the costs involved, home ownership can feel like the impossible dream.
Pooling your dollars with parents, siblings or friends to get a foothold in the housing market can allow you to split purchase costs and spread the repayment load. There may be financial advantages. The downside? Financial commitments are renowned for placing strain on the most robust of ties.
How do you reap the upside of property co-ownership without ruining the relationship?
Before you commence a conversation with potential co-owners it’s important to have a clear picture of what you want from this purchase and where you see yourself heading.
Where will you be in five years? What’s your vision for this property? Are you planning to settle in and stay? Put down roots? Or maybe it’s short term for you? A property kick start with travel and adventure still in your future?
Other questions to ask yourself:
The first step in any important decision is to have a clear plan or strategy for the future. Flesh it out as much as you can and write everything down. If your goals align with the goals of your co-owners from the outset you set yourself up for a smoother relationship.
Legal, financial and property experts can assist with the nuts and bolts of planning your property purchase but how do you negotiate your ‘psychological contract’ with family or friends?
In every relationship there are unstated expectations. Children hope their parents might help them out if money gets tight. Friends may forgive a small transgression here and there. When there is little to lose unspoken expectations are easily managed with love, give and take.
Raise the stakes though and it’s human nature to protect our own patch. Conflict arises when emotion is heightened and expectations are unclear.
Before making the financial and emotional commitment of co-ownership it’s vital that you discuss the relationship and make assumptions explicit upfront.
Some questions to ask include:
Do we have the same goals and timeframe in mind for this investment? What do we do if someone can’t make a mortgage payment? How will we handle it if someone wants out? Have we agreed on living arrangements? Can a co-owner approve a new tenant? Who organises repairs? How are they funded? How will we resolve conflict?
Once you have the answers they can be formalised in a legal co-ownership agreement. This is advisable but not strictly necessary. You can keep the arrangement informal but documentation of your discussion and its outcomes could save a lot of heartache down the track.
Conversation about your co-ownership relationship doesn’t end when you sign on the dotted line. Regular discussion about what’s working and what’s not will lessen the likelihood of misunderstanding or major conflict erupting later on.
Schedule regular meetings to cover the key topics in your (formal or informal) co-ownership agreement. Ask plenty of questions. Is each party still happy with arrangements? Does anyone foresee change? Are there terms that need to be renegotiated? Any sticky issues?
Ensure that everyone is listened to - and heard. Don’t assume that you know the answers, even if they’ve never changed in the past. If communication is regular, open and respectful uncomfortable topics or concerns can be raised with little risk and an opportunity to clear them up before they become critical.
If tensions rise and arguments do flare up it helps to address them early before they have a chance to fester. Formalise a plan for managing conflict that is incorporated into your co-ownership agreement. Decide as a group that you will listen to concerns and negotiate as soon as they arise.
When we’re frustrated our ability to think clearly and solve problems diminishes. Ask yourself, ‘Is the issue worth fighting over? Is there another way to resolve it?’
Other points to consider:
If you can’t find a resolution, you may wish to seek the help of a professional mediator. The upsides of property co-ownership are lost if you allow quibbles to ruin your relationships.
Guest blogger Ellen Jackson from Potential Psychology is a specialist in how you perform at your best. She writes across the internet about human behaviour and how to do it well. When she’s not at the laptop she’s talking to people at work about great people management and how to be resilient.