Getting into the housing market is a struggle for so many people. Prices are soaring, even though experts keep talking about a “bubble” and how it’s “going to burst.” Well, here’s what we know now: it hasn’t burst, and it’s not likely to burst in 2016 (Although, some critics says Vancouver’s real estate market will be a “debacle” this year). Property values are high (last year, the average house price rose 9.5 per cent to $448, 862), and they’re steady or climbing. This is great if you own a house, but if you don’t, it’s probably a source of anxiety. Will you ever enter the market? You could, right now.
Well, if you’re comfortable with sharing your house with someone else, then yes. Otherwise, keep saving and those fingers crossed that some day you have enough (or the market dips in your favour).
Co-owning is actually quite popular these days. It sounds simple enough, but you really should think about it. Don’t just sleep on it, really sleep on it. And then figure out:
Who is paying for what?
Co-owning a house is typically an undertaking of Boomer parents and their Gen X or Millennial kids, or friends. The impetus is always the same: one or both parties can’t afford a house on their own, but together, it’s manageable. So, before you even start looking, get a contract in order. Each party should have independent council, and you should decide what your personal needs are before you come together to discuss the contract.
You also need to determine who is paying what: can one of you afford the down payment while the other person takes care of the monthlies? Then, there’s your arrangement. Figure out the best plan that works for both of you.
What needs to be in the contract?
This is a business venture. You’re putting your own money into this, and your partner is putting theirs. You do not want to mess around, even if you are friends or family. Protecting yourself isn’t a slight, it’s just practical. You need to set up the title as “tenants in common” and you need to include buyout clauses. Like, for example, there should be a clause that guarantees that whoever is backing out is bought out for the value of the property at the time. It’s small details like this that, when overlooked, lead to big headaches down the road.
Did I forget anything?
This is another reason why each individual party should have their own lawyer. You can (and will want to) stipulate every minute detail in your contract. Like, how much will it cost to buy someone out? You should know that ahead of time. And if at any point in these proceedings, there are irreversible details that cause conflicts, step back. It’s not a good idea to proceed if you aren’t both comfortably on the same page. If you go in with problems, they don’t go away with ownership of a house that costs nearly $500,000.
Can I buy a fixer-upper? Wouldn’t that be cheaper?
In the long-run, 100 per cent no. It may seem like a really fun idea to find some cheap hole that you can turn into your Nancy Meyers movie set, but you can’t actually do this without cash. A lot of cash. And if you’re co-owning a house, you’re investing your nest egg into the house itself. So, find something practical, and fairly move-in ready. You can do that with your next property if you ever decide to leave, but right now, be safe.
So, yeah, there’s a lot that will go into this arrangement, but given the climate, it’s kind of one of few solutions. This is actually a good plan if you want to accumulate less good debt than you would otherwise. Just make sure you’ve got the right partner in crime.
Watch the video above to hear what one real estate expert has to say.