Building a house with friends — can it work for you?


We live in an age where there are more possibilities than ever, and sticking to ideas about how you should do things, like buying your first home, is unnecessary and can often hold you back. Black-and-white options are the enemy of opportunity and need to stay out of your life plan. Days of strictly singular-owned houses and mortgages are ending, and many people are finding other pathways into homeownership much easier through sharing the property's equity.

But does that mean you should jump straight into buying a house with a friend? Not blindly, of course. There are some definite things you need to consider before you do, in terms of whether a shared ownership mortgage is right for you as well as the person or people you take with you on the journey.

The logic is right

The hardest thing to wrap your head around when building a house with a friend is the unfamiliarity of it. Traditionally, if you don't do it alone or with a partner, it's hard to see how it can work effectively. But the standard benefits of buying a home are still there when you build with a friend, plus some more for good measure.

It works just like chipping in for a road trip. You pool your money together for a deposit to reach the goal faster or invest in a much more valuable property requiring a larger deposit. You both commit to a portion of the mortgage and property, pay off the property together, and claim the advantages of entering the rental market faster than you otherwise could.

For example, if you and your friend decide to build a property and each own half, you will both only have to pay half the mortgage and put up half of the mortgage deposit. You would both enter the property market much faster than if you had to do it yourself. It also means you can quickly live in your own property and stop paying rent (i.e. pay your own mortgage instead of someone else's). Then, if all goes well, you'll reap the rewards of a steady housing market, and you might both have bigger returns when it comes time to sell.

The main cons and risks

As we know, there's no investment without risk, and building a house with a friend comes with a slightly different risk than is typical for the property market. The risk involves the relationship and interpersonal dynamics between the co-owners. There's an old trope around mixing business and pleasure because business relationships require different demands and dynamics than the ones we have in our personal lives.

Property co-ownership can put friendships to the test, and it can mean both parties share the financial risk. You also might feel tested when deciding on the nitty-gritty details – who takes which room, who handles the maintenance processes, and will you split the bills in half? These are small details, and friends considering co-ownership should already be able to handle making agreements like these.

But buying a house with a friend is not strictly a business relationship. There are financial involvements and shared assets, but it's still a personal journey and commitment. You or your friend's dreams and plans can change. One of you could meet someone you'd like to build your new property with, or you might decide you no longer want to live together.

It can test your relationship, and if it develops into an unresolvable conflict, you can both be stuck in a financial situation that you want to get out of. If this happens, the solution is disruptive but not a significant problem. You can sell the asset, or one of you can buy the other one's share of the property and take full ownership. 

These risks of building a house with a friend are not detrimental, so they don't make it a bad idea, but they're important to keep in mind so you know the possible outcomes.

Choosing your co-owner intentionally is key

You can easily minimise the risk by choosing your co-owner wisely. Many successful shared ownership mortgages have worked between best or not as close friends, siblings, business partners and even work colleagues. The important part is to choose a partner with a similar mindset and vision. With the same goals for the property, it's much more likely that you'll both get what you're after from the arrangement.

How to make it right for you

There shouldn't be guesswork around property decisions. Co-ownership is a profound initiative that is helping many first-time buyers own their home faster and stop wasting money on rent. You can make sure the decision is right for you by tackling some key considerations at the beginning. Once these arrangements have been made and both parties are clear about their role and agreement, things will flow much smoother.

  1. Decide on the ownership structure. Who will own how much? What percentage? Joint tenants? This is the big one. You can either be joint tenants, where, as a group, you own the property, but both individuals own nothing. Or you can be tenants in common, where both of you own a predetermined portion of the property.
  2. Get clear about the financial intricacies. Transparency will help everyone understand the best option and help you avoid problems. Get clear about how much you've both saved for a deposit, how much you can borrow and how much each of you will own of the property.
  3. Then, get it in writing. You can both seek independent legal advice and get the arrangement in writing. This might sound a bit full-on, but it's best to practice going into an agreement like this.
  4. The fun part. Choose a builder and decide on a location and property type with them. This is probably the most potent time for disagreements, so make sure you use a trusted builder who has your best interests in mind.


First-Place helps first-time homebuyers build the property of their dreams with affordable packages to kickstart their property journey. We'll help you see your options more clearly and decide on a co-ownership new-build plan that works for both of you and provides you with a property that meets your needs and preferences and offers great value. Check out our first home buyer guide and price your home with our home configurator. Get in touch today on 1800 134 778 or enquire to find out more.

This advice in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs. It is recommended you seek professional advice from a financial adviser before making any important decisions. 
First Place is not a financial adviser. You should consider seeking independent legal, financial or other advice to check how the website information relates to your unique circumstances.


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