Looking to co-purchase? Consider a co-ownership agreement
Real estate is one of the largest asset classes in the world today, yet many individuals do not have the financial capacity to purchase a property on their own. For these individuals, co-buying with family and/or friends may be a good option.
Co-ownership can offer many benefits, the most obvious being the lower financial contribution required from each purchaser involved. However, before entering into such arrangements, it is important to consider the possibility of conflict arising between you and your prospective co-owner at some point during the future.
Before co-buying you will need to consider the legal structure for your purchase – that is, whether you will own the property as joint tenants or tenants in common.
A joint tenant structure is usually entered into by married couples, as each investor owns the property in equal share under an ‘all or nothing’ arrangement, which means that if one tenant dies the rights to the property vest in the remaining tenant(s).
For purchasers looking to buy for pure investment purposes, a tenants in common structure is usually undertaken. This means that although each purchaser has a share in the investment, each is also entitled to sell their share at any time without consultation – something which can potentially spell trouble for the remaining tenant(s).
This is why investors should consider co-ownership agreements; these can take into account all possible eventualities and enable each owner to implement contingency measures prior to the property purchase. For example, if one owner suddenly wished to sell their share, a co-ownership agreement could ensure that the remaining owner(s) had first right of refusal to buy it.
At the end of the day, it is important to make sure that your real estate investment is secure, and for those considering co-purchasing, a co-ownership agreement could be an important step to ensuring such.
For more information about property investment options in your area, please contact your local Century 21 office.