Tradie’s ‘Impossible’ Property Realisation Leads Him to Growing Co-Ownership Trend: ‘Get in Now’ | In the Media

The following article was taken from Yahoo Finance. Read the article in full below: https://au.finance.yahoo.com/news/tradies-impossible-property-realisation-leads-him-to-growing-co-ownership-trend-get-in-now-005357662.html

More Aussies are teaming up with friends and family members to get into the property market, as prices and the cost of mortgages increase.

A Gold Coast tradie was finding it “impossible” to save up a deposit for his first property, so he decided to “go halves” with his best mate. More Aussies are teaming up with friends or family members to get into the market, as property prices and mortgages continue going up.

Jarad Johnson is currently preparing to buy a house on the Gold Coast with his best mate, Riley. The 26-year-old plumber told Yahoo Finance the pair were both hoping to buy their first property, but were finding it difficult to do solo.

“It’s too hard to do it by yourself. These days, it’s ridiculous,” Johnson said.

“Not just the deposit, but the mortgage. It’s just impossible to support yourself and a loan.”

Johnson earns about $95,000 base as a plumber, along with getting between $10,000 to $15,000 overtime pay, and has saved up a $60,000 deposit.

Riley works as an electrician and has saved up a similar amount.

The friends are hoping to buy a three-bedroom house to live in on the southern Gold Coast with a budget of $900,000. They plan to renovate the house themselves so they can add value.

Johnson said it was important for him to get into the market as soon as he could and estimated it would have taken them another five to 10 years to save up a deposit by himself.

“Property is not going down, it’s only going up,” he said.

“I really just want to get in now, to be honest.”

The pair plan to use the expanded First Home Guarantee scheme, which allows buyers to purchase with as little as a 5 per cent deposit without paying lenders’ mortgage insurance.

From October 1, the scheme will be expanded, including property price caps which will go from $700,000 to $1 million for properties on the Gold Coast.

The scheme changed the rules back in July 2023 to allow friends, siblings and other family members to apply jointly, not just couples.

Property trend expected to become more popular

Your Future Strategy managing director, Gareth Croy, told Yahoo Finance that he is seeing more people buying with friends or family members.

“Property prices have got to a point with servicing capacity that those who might have done it on their own in the past are just priced out with borrowing capacity,” he said.

“They may not be in a relationship, so don’t have a partner or spouse to do it with, which is where they’re now leaning into doing it with a friend or a family member.”

Research from ING last year found interest in buying with a friend had increased.

Almost half (47 per cent) of Aussies who have purchased, or are considering purchasing a property with someone who is not a spouse or partner, say they’d consider buying with a friend.

A similar amount (46 per cent) of Aussies believed that in the next decade, this type of home-buying will become more common as property prices continue to rise.

Aussie warned there are risks involved

While buying with friends has its benefits, Croy said there were also major risks involved and warned it was important to have clear discussions before jumping in.

“Things like when are we going to exit the property? What is the strategy around protections in place in case circumstances change?” he said.

“If you’ve got two parties coming together, it doesn’t matter whether they are friends or family, if one of them ends up in some sort of financial trouble, then there’s an impact on the other person and the property with them.”

Croy said parties were encouraged to seek advice and draw up a legal agreement that sets up the parameters.

This could include factors like the investment strategy, the timeline you are looking to hold the property, how to resolve any differences over how much to sell the property for in the future, and circumstances that might force you to sell the property earlier than expected.

Property lawyer Monica Rouvellas has also urged people wanting to go down the co-ownership route to formalise any sort of agreement.

She added that a common pitfall was the misconception that buying a home with a sibling or a friend meant the responsibility of the loan was 50-50.

“You are responsible for 100 per cent of the loan,” she told Yahoo Finance.

“While you might have an agreement that you’ll each contribute 50-50 to the repayments of the loan, if your friend stops paying, you can’t simply say, ‘Oh, well, that’s my friend’s responsibility.'”

Most co-ownerships are structured as joint tenants, where co-owners have equal shares and rights to the property. If one party dies, the surviving tenant then takes the whole property.

The other structure is tenants in common, where you can have unequal distribution of ownership. A share can be given through a will to someone other than the co-owner.

Friends using first home as a stepping stone

Johnson said he and Riley planned to get a written agreement in place before they bought a property together.

The pair plan to live in the house they buy and would ideally also rent out rooms to friends to help with their mortgage repayments.

Once they have built up enough equity in the home, they eventually hope to buy their own separate homes.

“It’s just gonna get us into the market for getting our first house. Then from there on, it’s easy with the equity to get another place and build your property empire,” Johnson said.

“If everything goes well, we can get another one, or we can go our separate ways and take half.”

About Your Future Strategy

Your Future Strategy is a multi-disciplinary financial services firm with experts across the financial landscape, including qualified professionals in financial planning, strategic accounting, lending, investments, estate planning and superannuation.

As financial strategists, they help create a well-designed pathway for people to tick off financial goals to give them choice in their future, whether that’s saving for children’s schooling and university, building a significant property portfolio, creating and protecting their legacy, or retiring early.