By Renée Sylvestre-Williams
If you carefully plan the emotional, legal and financial aspects of your acquisition, co-ownership with a friend could open the door to homeownership in today’s expensive real estate market.
When my roommate and I were ready to buy a house after sharing accommodation for a long time, we thought of pooling our resources: why not buy a nice little condo or a townhouse with a yard where we could receive? We got on well as roommates, so the idea of becoming co-owners made sense to us.
Everything was perfect. Unfortunately, when we set out to make our plan a reality and started visiting properties, nothing did the trick: either the bedrooms were not the same size – an important criterion – or we did not have enough of privacy each on our side, either the location did not suit one or the other.
Eventually, we spoke with open hearts, and it turned out that we weren’t as compatible as we thought: my friend didn’t appreciate my casual attitude towards the dishes piling up in the kitchen. Sink, for example, while, on my side, I had a very little affection towards its superb cat, which lost its hair with the size of the apartment.
Situations like ours will become more common as house prices remain high and the traditional homeownership model becomes unaffordable for many Canadians.
A credit card provider Capital One study reveals that nearly half of millennials would be willing to buy a home with friends. In addition, according to a report published by real estate company RE/MAX, more than 40% of Canadians would consider buying a home with a friend or family member. The reason is simple: the median sale price of single-family homes reached $317,000 in the Greater Montreal area in April 2018, according to the Greater Montreal Real Estate Board, a 4% increase since the same period the previous year. Therefore, splitting the ever-increasing housing costs with a trustworthy friend becomes highly tempting. Co-ownership with a friend is also an increasingly popular option for widowed and single retirees.
However, if you’re considering buying a home with a friend, you absolutely must do the necessary financial and emotional planning first.
Agree on the essentials
It could be dizzying to visit houses or condos randomly. That’s why, before you start your search, you should take the time to sit down with your friend and agree on your short-term wants, long-term goals, and basic needs.
Each on your side, write down your ideal characteristics (districts, surface area, number of bedrooms and bathrooms, communal facilities) and, above all, the price you wish to pay.
Then compare your notes. Do you still think you can get along?
Make a budget
It’s time to take a deep breath and have absolute honesty about finances: how much can you both afford? Does either have additional funds to allocate to their purchase (which would come from, for example, relatives or an inheritance)? Have you factored in property taxes, utility bills, closing costs, legal fees, debts and other expenses?
Being a homeowner: how much does it cost?
Talking about money with friends and family is often difficult, but applying for a loan – and possibly taking out a mortgage – is quite a commitment. Each co-owner must know in detail the financial situation of the other so that there are no unpleasant surprises once your property is purchased.
Ideally, your purchase will be divided into two equal parts (50-50); if not, now is the time to establish the breakdown of your purchase and your expenses – with the help of a notary, if necessary.
Protect your relationship from the vagaries of the future
To preserve your joint property, as well as your health and your friendship, you must carry enough insurance to protect you both against the unexpected. This includes home insurance, which covers, for example, pipe breaks, roof leaks, fire or burglary, and mortgage insurance, which combines life insurance and critical illness insurance to protect your investment in the event that your mortgage payments become impossible to make due to severe illness or
