Should You Buy Property With Your Sibling?

You shared a room as children and want to enter the property market as adults. But is sharing a home investment with a sibling a good idea? It can be, says Lisa Devereaux, who bought a property with her brother Michael in 2007.

A tale of two siblings
Devereaux was 27 when she became joint owners of the house in Mansfield, 11km southeast of Brisbane’s CBD. The siblings paid $430,000 for the property. Today it’s worth about $550,000. “I was single and could have saved up and bought something way out in the suburbs and have to bring in a roommate to help pay the costs,” Devereaux says.  “But my brother was also single and wanting to buy property so I put it to him that we go halves – I was the driver and did all the house hunting – and my brother was quite happy to go with the flow.”

What about when situations change?
The next few years were a whirl of comings and goings. The siblings lived in the house for two years before Michael moved out. Devereaux and her partner paid Michael “half equitable rent” before they moved out when she fell pregnant and the siblings leased the house to a tenant.

In 2012 Devereaux sold her 50% stake to Michael, who today lives in the house. She says the experience was rewarding because it gave her an all-important real estate grubstake. She used its capital gain to buy a home for her young family and plans to buy an investment home this year.

“Michael and I were tenants in common and we had to take out a will, be each other’s guarantor and were also able to set up our own mortgages on the property, which apparently is not common but we preferred it,” Devereaux explains. “It kept things clean-cut and I could have taken my loan to any other lender.”

What do the surveys say?
Siblings Lisa and Michael’s decision to pool their funds to buy real estate is all too common, according to a new survey by ME Bank.

Key survey findings include:

• Close to half of people have bought or would consider buying a property in joint ownership with family.
• 49.3% would consider buying jointly with other family members.
• 12.2% have already done so.

Should family come first?
Mortgage Choice’s Future First Home Buyer survey also recently found 67% of Australians plan to buy with a partner, spouse, family member or friend – significantly higher than the 30% who said they would purchase a property on their own. It seems many, squeezed out of the property market, are finding creative ways to get a foothold on its ladder.

4 points to consider
If siblings must borrow to jointly buy a property, it is important to consider these four points before jumping in, advises Mortgage Choice spokesperson Jessica Darnbrough:

1. Know what all parties want.
   Do you know whether all siblings plan to live in the property, or earn income from renting it out partially or wholly?
2. Financing matters.
   Lenders will still look at income, expenses, assets and liabilities of each borrower. “Keep in mind that if the buyers are not a ‘couple’, some lenders may assess their loan approval based on higher, individual living costs,” Darnbrough says.
3. Seek advice.
   It is always important to seek legal and financial advice before signing a co-ownership agreement.
4. Co-ownership agreement.
   Get this cornerstone legal document to set out the roles and responsibilities of each sibling and clarifying all important issues upfront, like what happens if one party wants to sell, Darnbrough says.

Source: www.realestate.com.au