WHAT DOES IT MEAN TO BE A CO-OWNER OF A PROPERTY?

The meaning of “co-ownership” in the context of owning property means the simultaneous ownership of a property by two or more people where their shares are undivided. It is becoming more common for people to choose this as a means of entering the real estate market, but it is crucial to be aware of the pros and cons in a co-ownership agreement. Let’s delve a little deeper into how it works and what you should be looking out for if co-ownership is your intent…

Is there a limit to the number of people who can jointly own property?

Two or more people can own a property together. Naturally, the more parties involved, the lower the sale's profit and the more administrative work there will be to transfer the title deed and to make decisions on what to do with the property later on.

Applying for a joint bond

You are free to apply for a bond with whomever you like, including a partner (even if you’re not married), an acquaintance, or one or more family members. Just make sure you have a written contract between the parties to safeguard all your interests. Joint bond applications require the same processes and documentation required for an individual application, but each party in the agreement will have to provide their information, supporting documents, and sign all the required paperwork.

How will a joint bond implicate you?

It's best to carefully consider your investment partners and have a good understanding of their goals and objectives before agreeing to buy a home. By agreeing to a joint bond arrangement, you and your investment partner(s) accept joint responsibility for the repayments, taxes, and other costs related to the acquisition or disposal of the property.

What are the rights and obligations of co-owners regarding the property?

This depends on the wording of the agreement made between the co-owners. In the eyes of the bank, all co-owners are liable to cover the repayments on the home loan – if one of the owners does not provide their portion of the repayment, the other owner will have to foot the bill for them. The same principle applies for municipal accounts – whoever’s name is on the title deed will be held responsible for payment. In terms of any other costs that are necessary to maintain or preserve the property, these expenses are usually shared between the co-owners unless another arrangement has been agreed to by all parties. All co-owners also have the right to agree to any changes made to the property - one co-owner cannot simply make changes without consulting the other parties first. Profits are usually shared based on the shareholding percentage of each co-owner, but this can change depending on the wording of the agreement set in place by all parties.

What are the advantages of co-ownership?

Co-ownership can be of great advantage in the purchasing of a large or expensive asset, such as real estate. Below are some more advantages to this ownership option:

• 1. Property affordability Many first-time buyers might not qualify for a bond on their own. Co-ownership makes it simpler to get a home loan because lenders will take into account your total combined income, living expenses, obligations, and credit ratings.
• 2. Shared monthly expenses First-time home buyers find great comfort in knowing they are not making the investment alone. The relief of knowing that household costs and monthly bond repayments are split with someone else can be quite helpful.
• 3. Shared investmentIt can be comforting to know that the risk of the investment is shared, especially if it's your first property purchase. This can build your confidence to make the next purchase on your own feel a lot less stressful.

What are the disadvantages of co-ownership?

Sharing ownership of an asset can also unfortunately come with risks. Below are some drawbacks to keep in mind if you are considering this as an option:

• 1. A fallout between the investors Fallouts and arguments are inevitable in life, especially for those who are also living together. In case the relationship takes strain, you need to have a plan in place to make sure all parties are protected in regards to the purchase. Keep in mind that neither investor can simply quit or withdraw. You are both responsible for making the bond payments and both have to agree to sell if that is the preferred resolution. One party cannot simply sell the home without the other co-owners consent.
• 2. One investor decides to sell While it is possible for one party to leave the ownership agreement, planning your departure strategy before signing the co-ownership purchase agreement is crucial. For whatever reason, the investor who wants to sell should first will need to make an offer to the other investing partner/s to sell their portion of the venture. To put it another way, the agreement should provide that the investing partner/s will always have the first offer and the right of first refusal.

What should you keep in mind?

This is a significant and weighty choice. It is best to be fully aware of what you are getting into before beginning. It is very important that prospective co-owners enter into a formal agreement between themselves before they purchase any property.

How long before you can expect to see a return on investment?

If the plan is to flip the home, then it will depend on how long the renovations or improvements will take to complete. Depending on the extent of the improvements, this could take anywhere from 3 months to 6 months or even longer. Otherwise, it is important to understand that property is a long-term investment strategy. To ensure the best possible return on investment, it is advisable to keep the home for at least five to ten years before selling. If you do not plan on living in the home, contact a real estate agent to help you rent the property out as a passive income stream while the home grows in value over time. Nobody in the world sells more real estate than RE/MAX. Don’t hesitate to contact your local offices for expert assistance from the best.