A 24-year-old (left) revealed he’s hunting for his second investment property, which he’ll buy with a friend, and property lawyer Monica Rouvellas (right) said this is a great strategy, but it can come with a few risks. (Source: TikTok/Supplied)
A young Australian property investor has revealed how he’s already on the hunt for his second home at just 24 years old. The pilot was stopped on the streets of Sydney and asked how he was handling the housing crisis, and revealed he’s jumped on a new trend to build his portfolio.
The man bought his first home with his brothers, and he’s planning on securing the second with a mate. Property lawyer Monica Rouvellas told Yahoo Finance she has seen a few of her clients do the same to get into the market.
But she added that it’s not without some big risks.
The pilot told property investment firm Coposit he has saved up $60,000 for his upcoming purchase, which he achieved by keeping his spending to an absolute minimum and working hard.
He said buying his first home was made ‘much easier’ by having his brothers and family add to the deposit.
You might think convincing a friend to buy a property with you would be a much harder task than roping in a sibling or two, however the aviator said it was fairly simple.
“I think that the social circle that you surround yourself with has a big impact,” he said.
“We’re all of a very similar mindset when it comes to property and the way that we save, the way that we handle our money, just makes life really that much easier if you surround yourself with people who also aren’t going out of their way with guilty pleasures or doing exorbitant expenses.”
Traditionally, many Aussies would have bought a home either by themselves or with their partner.
However, with housing becoming so expensive in many parts of the country, many are considering joining forces with their inner circle so they aren’t left in the dust by rising prices.
ING found 46 per cent of Aussies believe this will be a commonplace arrangement in the next decade, with Gen Z and Millennials the most likely to jump on this bandwagon.
The bank’s head of consumer and market insights Matt Bowen even said this trend could help keep the ‘great Australian dream’ alive.
This trend is not surprising as parliamentary library analysis found it takes between seven to 42 years for the top 10 most common jobs in Australia to save up a 20 per cent deposit for a $742,000 home, based on average earnings for their occupation.
The government has also made it easier for friends, siblings and other family members to co-own a property after expanding the Home Guarantee Scheme, which previously only covered singles, married or de facto couples.
The initiative was opened up in 2023 to cover these kinds of relationships, and eligible homebuyers can buy a property with a deposit of as little as 5 per cent.
Rouvellas said co-ownership can work well for teams where one had the savings for the deposit, and the other has the borrowing power in the eyes of the banks.
However, one of the biggest issues that can come up with co-ownership is one party wanting to sell and the other wanting to stay put.
The one who wants to stay will likely be confronted with having to buy out the other party at the current market value of the property.
“But for a lot of people, that’s not always an option. So, even though they want to keep a property, they may often be forced to sell,” she said.
She added that another pitfall is the misconception that buying a home with a sibling or friend is a 50-50 exercise.
“You are responsible for 100 per cent of the loan,” she said.
“While you might have an agreement that you’ll each contribute 50-50 to the repayments of the loan, if your friend stops paying, you can’t simply say, ‘Oh, well, that’s my friend’s responsibility.'”
She said if payment issues arise because of the other party, your future mortgage serviceability could be impacted as a result.
You can purchase the property and set up your co-ownership mortgage in two ways:
Joint Tenancy: All co-owners have equal shares and rights to the property. If one died, their share automatically passes to the other surviving owners and it’s usually done for those who want equal ownership of a home. This is the structure couples would typically buy a home with.
Tenants in Common: You can have different ratios for this setup, meaning one person could own 60 per cent of the home, while the other would have 40 per cent. If one party died, their share would pass to their estate or heirs, and this structure benefits those who might have different amounts available to purchase the home. One party can also sell their share of the property without needing approval from the others.
Rouvellas encouraged people wanting to go down the co-ownership route to make sure they communicate exactly how it’s going to play out.
“You should always formalise any sort of agreements, especially because what I see clients often do is that one person has the serviceability, the other one has the deposit, and it’s important to document exactly how that initial deposit is then paid back,” she said.
“But also, how can you potentially quantify the fact that someone has stronger serviceability in terms of accounting terms?”
But Rouvellas said one of the biggest aspects of the co-ownership agreement is trust.
“Emotions tend to run high, and while everything might be fine now, you don’t know what 10 to 20 years’ time will look like,” she added.
The lawyer said it’s worth sitting down with an expert to talk through your options and look at the potential issues.
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