Soaring housing prices have been the cause of a new trend, especially for Millenials. When couples today often can’t together put together enough to buy a house in Vancouver or Toronto, couples are now coupling together with other couples, and in some case splitting the house into two parts.
Many who are trying to get into the market view it as a short term initial plan to get their foot in door and build some equity. Some folks are breaking a down payment into 3 or 4 parts with their new housemates/co-owners.
But with home prices in the Lower Mainland’s volcanic-hot real estate market – many in already in this arrangement, who had hoped to break free on their own, are now thinking of staying put. Some are investing in their crowded house to expand it versus selling and going their separate ways.
Many more first-time homebuyers are contemplating arrangements into such types of arrangements as long-rising prices in markets such as Vancouver & Toronto have eroded affordability.
Many younger Canadians are looking to friends & family for housing help
A recent random poll discovered that about 1 in 4 millennials would or are already contemplating purchasing a home with a friend; nearly double the percentage of a sampling taken in 2015.
Similarly numbers of fresh 1st time buyers who would considering purchasing with a family member was also 24%, up from 14% in 2015; as in some of the larger Canadian markets. Being able to qualify for their first home (or condo) is increasingly more challenging or entirely out of reach.
Not only have there been higher selling prices, but also premiums on mortgage default insurance have also risen: which only make the problem(s) worse.
Crowed House of Group Investment?
While many co-purchase arrangements involve both parties living together in the home; this isn’t always the case.
When Raymond Wiabel bought a $340K 2-story detached house in East Toronto with a long-time friend in 2012; they each put in half of the down payment. They agreed to split the cost of all of expenses and any capital gains when they sell. But only Wiabel lives in the home; for his friend, the transaction has been purely an investment. Raymond considers him a second spouse because as they own the house together.
For some, it is a possible way to get into the market sooner.
Some caution that such arrangements come with risks, as when someone purchases a house together, it is basically like starting a business together. There are going to be points in time where things might not be so cozy, and people account for that. It is recommended to those to consult with an attorney and draft up a mutual agreeable written plan document – that covers everything imaginable when something happens; such as if one party wants to sell or how the cost of repairs will be managed/split.
Also co-investors should know that their name and your credit file is attached to the overall debt – so if a partner you are investing with loses their job, et al., and they can’t make their part of the mortgage payments – then that’s going to affect the other partner too.
Knowledge and real estate leads – two ingredients for increased success in your career.
