Q&A with Troy MacMillan: Invest time in getting it right
Andrea of West Leederville asks:
My brother has suggested that we buy an investment property together – what are the risks associated with this?
A: A lot of younger people are worried whether they’ll ever be able to get a foothold into the property market. That’s why some are looking into pooling their money with family members to buy a property, either as an investment or for somewhere to live.
It absolutely makes financial sense to buy a property with your brother, however there are a number of things you really need to get right upfront before you take the plunge, as a bad financial decision involving family members can take a very, very long time to resolve.
Having the right ownership structure is really important, with a recommended framework for siblings owning property together being tenancy-in-common. Tenancy-in-common allows two or more people to have an equal interest in the one property, which also means you each share liability for the property.
You also need to keep on top of the finances, as it’s the money side of buying property with someone else that can make things complicated, due to the shared nature of the costs involved.
It’s often the ongoing costs that create the most tension, so having a sinking fund, where you both contribute a set amount to cover repairs, and the mortgage when the property isn’t being rented, may help to make things easier.
And then agreeing upfront on what the process would be when one of you wants to sell the property will save an enormous amount of heartache, especially if one party doesn’t want to sell.
Like any investment, it’s also vital that you understand the tax implications involved when investing in property. It’s worth engaging a tax accountant to help you with this, as it means your decision will be based on professional advice around the different strategies and options available to you, helping you to be more comfortable with your decision.