But have you considered buying with a friend or relative?
While not something that people generally considered in years gone by, purchasing a property with another party is becoming more and more popular. Let's face it, if you can't afford it by yourself, maybe buying with a friend or relative might be one way to get into a property market that was previously unaffordable. But there are some things you need to be aware of.
Structuring your co-ownership
When you purchase a property with another person, there are two ways you can structure the arrangement. You will either be listed on the title as tenants in common or joint tenants. The option you choose will depend on your relationship and how you want to manage your financial affairs.
Tenants in common
As tenants in common, you will own a set percentage of the property and this will not change. Any expenses incurred for the property will be payable as per the portion owned, as will any capital gains incurred. For example, if you own a 45 per cent share and your friend owns the remaining 55 per cent, you will be responsible for 45 per cent of the expenses and will need to declare 45 per cent of any capital gains. Additionally, should you pass away, that percentage of the property you owned will form part of your estate and will not transfer to the other owner(s).
In theory, you can sell you portion of the property without needing approval of the other property owner.
Joint tenants own a property together – it a joint property. They are equally liable for expenses and equally obligated to report any capital gains. If one party dies, then the property automatically becomes the property of the other party. This is most common when spousal partners purchase a property but can also be relevant when families or trusts are involved.
It is worth noting here that any decisions on expenses or selling the property should be made equally between all parties as they are all equally affected.
Need some advice?
As with any significant purchase, buying property has a number of legal considerations. It is always worth consulting a financial expert before purchasing in order to determine what the best structure will be for your specific needs. There are things you can do if you choose the wrong option, and there is no transfer duty or tax payable to change structures, but it is always better to get it right in the first instance.
If you would like to consult with a financial planner to discuss your options regarding the purchase of a property, we can assist you. Stone Accountants & Advisors are experts in all things financial and taxation related and work closely with financial planners who can advise you on property structuring. Give us a call on (03) 9870 7247 or send us an email at email@example.com for more information.