Gday guys, I just stumbled across this forum because Im in need of some advice. Three friends and I have flirted with the idea of purchasing a house together. We have discussed the obvious things like risk and all that jazz but are just unsure as to how to go about it and whether we can realistically accomplish it. Our situation is as follows;
All 21 years of age. Good credit history with no defaults.
First Applicant – Earning ~$60k gross per annum, brought first home approx 2 years ago and currently paying off mortgage house valued approx $100k over mortgage value. Been with employer 2 months. Home value approx $300k
2nd applicant – Earning ~$50k per annum, brought first home approx 18mths ago. ~$50k left on mortgage of ~$100k home in rural victoria. Been with current employer 2 months.
3rd Applicant – Earning ~$50k per annum, no outstanding debt at all. Never had a loan of any sort or any other outstanding debt. Been with current employer 18 months.
4th Applicant – Earning ~$70k per annum, approx $20k outstanding personal loans. Been with current employer 30 months.
Looking at those details do you think we would be able to get a joint loan of some sort for a property? We are looking at $300k-$350k total for the property but understand we would probably not get the loans individually. Will the banks assess us as a whole or individually? At the current point in time we do not have much of a deposit at all.
After some googling I have seen that a tenants in common agreement would probably suit us best but we have no idea how to go about it at all. Any advice or help you guys can give will be greatly appreciated.
Regards,
Rod.Hi Rod,
Good idea … Go to a solicitor and get a JV Partnership agreement drawn up along with advise of a good accountant of how to structure an entity for the purchase …
Simple.
D
Have you considered the idea of owning a large house converted into individual flats, or a small block of flats so you can all have your own individual space? Just a thought as this is likely to end up being a fairly long-term relationship and as soon as one or more of you starts getting serious about marriage and/or children it could upset the apple cart a bit if the others aren't into the baby scene or such.
I would want to be very sure of the partners, especially if you're all going to be living together under one roof and recommend that you take care of the downside before you get involved, i.e. figure out how you're going to unwind the deal if one wants out.
Good thinking though Rod.
Vicky
We have definately looked at all the possible pitfalls and what not. We are hoping to live in this property for a few years and the plan is that when the time comes that one or more of us want to move out we will have 2 or 3 properties under our belt and be able to set up our own homes using the shared properties as equity.
Our situation right now requires us to move into a property before the months end. We are probably going to get a rental property on a 12 mth lease and whilst renting we can put the wheels in motion for owning our first shared property.
Sounds like a good plan, plus it will give you all a good idea what living together is like.
All the best with your venture.
Vicky
You should also think about your liability (Someone with more knowledge should chime in here) but if you are jointly liable for the entire mortgage it will significantly impact each of your serviceability for further investments.
This means that each of you are treated as having the full mortgage not just your share!
This was always the major downside with joint ventures with friends – your net serviceability goes down… Hence it only made sense for short term investments that you could turn around quickly.
Hi, I've actually been down this road myself and let me tell you the pitfalls can be huge.
Admittedly in my case the three of us got together to purely buy investments properties, not to live in.
We meet constantly for a period of twelve months thrashing out every possible scenario we could think of arising. You have to consider disputes, friendships, liability, responsibility etc.
You should have a clear Agreement drawn up which details everything, so from day one everybody knows exactly where they stand.
In my case, just because I "assumed" the workload of sourcing properties, research, due diligence, inspections, etc, etc, etc, would be spread across all three of us…didn't happen. I found myself constantly being the one holding the bag and doing everything…frustrating would be an understatement.
Also just because you "assign" a party a role, ie: financial record keeping….doesn't mean they will do it, or to a reasonable standard.
I don't want to throw a wet blanket on your idea, because I think JV's are brilliant. You just need to be very clear from the get go, what your goals are, timeline for those goals and how you will achieve them.
In fact, I've just this second had a brainwave, (maybe) …. if you have twelve months to consider this venture…why not do a "dry run" – go through the complete motions on paper only, it might give you all a chance to find any shortcomings or for people to shine in some areas.
Anyways, we had to terminate one of the JV partners to get a purchase across the line…it was a buggar of a lesson, but at least we all came out of the experience "relatively" unscathed.
Good Luck.
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