The tips and traps of buying an investment property with someone else (week 2)
Last week we talked about the tips and traps of buying an investment property. This week we pick up where we left off.
Tip 4: The mortgage
If the loan documents are signed by all co-borrowers, then each borrower is jointly and severally liable for each other’s’ debts. This means if your partner decides not to pay the mortgage one week, you will be stuck with the liability for this.
Hopefully your co-ownership agreement (see tip 1) will cover this situation but as the old saying goes, you can’t get blood out of stone. If your partner doesn’t have the money to pay then that is bad luck. You are likely going to have to sell the property (which may be at a loss) to clear your debt. It may also affect your credit rating for future loans you need to get.
Tip 5: Do you even want an investment property?
Don’t get caught up in the hype surrounding property investment. Property is just like any other investment, it has its pros and its cons. One major con is it requires a large capital investment to get started.
If you have a limited budget, perhaps you should look at investing outside of direct property. Your financial adviser should be able to give you advice on investments that suit your goals, appetite for risk and budget. You can still enjoy the investment returns of property without actually buying property through property trusts. That however, is a topic for a whole different post.
What about you? Have you ever considered investing with a family or friend? If you did how did it go?
This post is from Ben Brett. Check out our details in the About Us page.