Buying property with 2 or 3 people

misty floyd

Hello,

Myself and my girlfriend have been saving money for a deposit to buy some property. We've got about 10k at this stage. We have a combined income of €58k. My girlfriends brother has money for a deposit and has been asking about going in on a house with us.

The idea (and it is only an idea at this stage) is something like this. If we go for a house for say €300,000 (to make things easier to explain). He puts up 10k for the deposit and he gets 1/3 of the mortgage. In other words, ownership is split three ways and it means we can go for a better location as we'll get a larger mortgage. As he just wants to get on the ladder and sees this as his chance, he offers us to buy him out in two or three years.

Obviously my girlfriend and I would be landed with a bigger mortgage but by that stage I estimate our combined wages to be approx €75k. We would also treat this as an investment and have solicitors involved etc should anything go wrong.

What he gets out of it: To be in a better position to purchase on his own in 2 or 3 years as he'll make a profit on his third of the house (provided the house price has gone up).

What my girlfriend and I get out of it:
- Be in a position to buy a house in a better location i.e in Dublin (don't fancy too much travelling).
- Have a slightly less mortgage for the first 2 or 3 years.
- Also, if we can't make up the money for the deposit, he will cough up the money for that and we wouldn't have to pay him back from the time the deal is done until the time of the re-mortgage.

I know there is a good chance (if not certain) that the house price will have gone up and we will be the ones paying him the profit and left with a large mortgage but I am assuming we will be on higher wages at that stage.

Is this a crazy idea? What kind of mortgage do you think a couple would get with a combined income of €58k and do you think we (me and the girlfriend) should try to purchase without the help of her brother? I'd really appreciate any advise.

Cheers

ronbyrne2005

if he owns a third of the house is he gonna be living there or are you gonna pay him rent for the one third of the house? if he doesnt want any rent from you and just wants the projected capital gain then its a good deal for you and a bad deal for him,he's taking advantage of your first time buyers status though if his names not gonna be on the deeds.

misty floyd

ronbyrne2005 wrote:

if he owns a third of the house is he gonna be living there or are you gonna pay him rent for the one third of the house? if he doesnt want any rent from you and just wants the projected capital gain then its a good deal for you and a bad deal for him,he's taking advantage of your first time buyers status though if his names not gonna be on the deeds.

Hi Thanks for your reply.
No, he doesn't want rent and doesn't want to live in the property. He does want to get his name on the deeds which means the three of us can get a decent mortgage. If his name was not on the deeds, in what way would he be taking advantage of our first time buyers status? Cheers

optiplexgx270

Stamp duty.

Bluehair

Imho it sounds like a nightmare waiting to happen.

So is he going to be paying 1/3 of the mortgage for 3 years or so without living there or getting any return? Why? I can't see even the most bullish property fanatic thinking thats a good idea for him.

You really need to sit down and bang out the maths on this one including exactly how much the house must appreciate in order to cover your costs such as stamp duty, solicitors fees etc. etc.

I would really urge caution on this one. You don't seem to have given any serious thought to what would happen if property prices do fall or even stagnate. Have you been following much of the domestic, central bank and government reporting recently that property is overvalued?(it's a long way from your 'good chance' that property will have gone up). What if one of you loses their job? What if you and your girlfriend split up? What if one of you wants out sooner rather than later?

Imho there's an awful lot of potential major downsides to this arrangement and very little (and completely speculative) upside.

Don't confuse buying your own home with making an investment.

misty floyd

Bluehair, thanks for your reply.
We do intend to sit down and work out the maths on this of course. For him it is more of a case of making a profit at the end of the 2/3 years but for us its a case of buying a home in a dublin location. I am aware that he could make no money on this due to fees and stamp duty and I'm aware of potential pitfalls from our point of view. Don't get me wrong, I'm not naive to think bad things can't happen. However, I probably am being silly to just expect house prices to keep going up.

We've got lots of homework to do on this but its been good to hear different opinions so thanks for that.

If anyone else has any opinions feel free.
Cheers

Reyman

Bluehair's right you're setting yourself for major trouble with this scheme and I doubt if lawyers will be much help beyond taking nice fees.

Too many downsides dude! Get sense or you could be buying major trauma.

pcwares

make sure both parties get independent legal advice and representatives. Do not use a common solicitor such as a family lawyer. (Contract law)

misty floyd

Hi thanks all for your replies.
We are not going to go ahead with this as there is too much of a dependence on solid house price increases over the next couple of years. That as well as plenty of potential problems, its too much of a risk and effort to go with. Cheers

RainyDay

Anyone thinking of going ahead with this would need to have a good agreement in place beforehand specifying (amongst other things) an exit strategy for what happens when one party wants to get out - you'll find some hints on what this agreement should cover over on Askaboutmoney.com