Purchase with friend

bigslick

A friend and I are considering buying a house together as renting is becoming harder due to having been moved around a few properties in recent years due to 'Refurbishments'.

We are both on professional salaries and combined we would be able to get a good mortgage amount. However where we differ is amount of deposit, he has effectively 5-10k where I would be lucky enough to have closer to 50-60k to contribute. If we were to go ahead and look to purchase would we split equity based on deposit contribution? Or if I was to buy house on my own (using only my deposit) but utilising their salary with the banks to get a higher mortgage, would there still be a requirement to have both names on deeds?

Naturally is touchy subject and am not looking to do anything underhanded, but just want to ensure that the potential difference in contribution to house doesnt end up costing me in the event of any future sale.

Thanks

godtabh

Look at the horror stories here from celctic tiger era situations similar to yours. I wont do it.

DublinDilbert

bigslick wrote: »

A friend and I are considering buying a house together as renting is becoming harder due to having been moved around a few properties in recent years due to 'Refurbishments'.

We are both on professional salaries and combined we would be able to get a good mortgage amount. However where we differ is amount of deposit, he has effectively 5-10k where I would be lucky enough to have closer to 50-60k to contribute. If we were to go ahead and look to purchase would we split equity based on deposit contribution? Or if I was to buy house on my own (using only my deposit) but utilising their salary with the banks to get a higher mortgage, would there still be a requirement to have both names on deeds?

Naturally is touchy subject and am not looking to do anything underhanded, but just want to ensure that the potential difference in contribution to house doesnt end up costing me in the event of any future sale.

Thanks

You buy and rent him a room, this will allow him save a larger deposit for his own purchase, also your not taxed on the rent a room income. Much simpler in the long run. Win win, he gets the stability of renting from you and allow him to save more.

professore

You have to work out the details among yourselves. If you are planning on paying equal repayments it's hardly fair to split based on deposit contributions as the deposit is only 5% - 10% of the purchase price, and a much smaller % of the overall cost - you will pay at least double the purchase price over the life of the mortgage.

However you should get more equity than him, no question. Probably a 65 / 35 or 60 / 40 split sounds fair. You could make a separate arrangement that he pays you back 1/2 the deposit over time and give him 50/50 once it's paid.

A solicitor needs to be involved here. As others have said, any arrangement has to be legally watertight, with penalties for breaking it.

professore

DublinDilbert wrote: »

You buy and rent him a room, this will allow him save a larger deposit for his own purchase, also your not taxed on the rent a room income. Much simpler in the long run. Win win, he gets the stability of renting from you and allow him to save more.

I suspect the OP wouldn't get a mortgage on their own.

is_that_so

bigslick wrote: »

A friend and I are considering buying a house together as renting is becoming harder due to having been moved around a few properties in recent years due to 'Refurbishments'.

We are both on professional salaries and combined we would be able to get a good mortgage amount. However where we differ is amount of deposit, he has effectively 5-10k where I would be lucky enough to have closer to 50-60k to contribute. If we were to go ahead and look to purchase would we split equity based on deposit contribution? Or if I was to buy house on my own (using only my deposit) but utilising their salary with the banks to get a higher mortgage, would there still be a requirement to have both names on deeds?

Naturally is touchy subject and am not looking to do anything underhanded, but just want to ensure that the potential difference in contribution to house doesnt end up costing me in the event of any future sale.

Thanks

As others have suggested work out a deal and get it drawn up by a legal eagle. I'd also consider other relationships you both would have outside the home, in how you structure it and how the end of the financial deal would be resolved.

PhoenixParker

Your wording "naturally is a touchy subject" suggests to me this is a bad idea, even with the tightest legal agreements.

You need to be able to communicate with your purchasing partner clearly, effectively, without fear or defensiveness.

If the most basic discussion about how to split ownership is already a touchy subject, that does not bode well for the future of your business or house sharing relationship.

lawred2

Do not do it.

Let's see you or your friends circumstances change outside of your control and you or they lose income? You will be jointly liable for the mortgage - not separate liable.

What happens if one of you finds a partner? They going to move in? Try to buy the other out?

Everyone's life moves at different speeds.. you may be in the same 'place' now but even 12 months later, it could be entirely different.

Jesus you could plain and simply just fall out and now you're both stuck.

Avoid such an arrangement like the plague.

One poster suggested making one of you a licencee - that's about the best suggestion

Amirani

Join ownership of property with a friend is almost always a terrible idea I've found. I'd advise exploring other avenues.

fletch

Don't even consider it.

I bought with a partner. I paid full deposit, he promised to pay back half.

Queue 7 years later, we split. I move out, he loses job, stops paying his half of the mortgage payments. Still not paid me back the half of deposit. I have to pay the full mortgage while he lives in house for free and I'm back in my parents place. He then refuses to allow the house go up for sale. I have to issue Circuit Court proceedings to force the sale.

You think it won't happen to you. It could.

Zamboni

I know renting it tough.
I know trying to get a mortgage is tough.
Keep on fighting the good fight.

But - Do not do this.

The Enbalmer

The worst ship that ever sailed is a partnership

the_syco

bigslick wrote: »

We are both on professional salaries and combined we would be able to get a good mortgage amount. However where we differ is amount of deposit, he has effectively 5-10k where I would be lucky enough to have closer to 50-60k to contribute.

So, same salaries, but you can save better? Who's idea was it to join up?

lawred2

Would you hand this person 30k in cash? With no strings attached?

That's effectively what you would be doing when paying their share of the deposit. Hard to believe for a second that you are entertaining this.

fletch

You've already saved a substantial sum...keep doing as you are doing and you might be in a position to buy a lot sooner than you think.

DublinDilbert

professore wrote: »

I suspect the OP wouldn't get a mortgage on their own.

They mention they are professional and have saved €60K, that should enable to buy something. I would guess that purchasing together could put them into a bigger house or better area etc, but IMO it wouldn't be worth it. I would rather rent a room from a friend than a stranger.

PauloMN

Even if both parties were going into this with everything being a 50/50 split, it's a risky enough move. Going in with the complexity of different deposit amounts is an absolute no-no in my opinion, and is asking for trouble. I agree with the other posters on this, avoid at all costs.

bigslick

DublinDilbert wrote: »

You buy and rent him a room, this will allow him save a larger deposit for his own purchase, also your not taxed on the rent a room income. Much simpler in the long run. Win win, he gets the stability of renting from you and allow him to save more.

My buying power would naturally be more with inclusion of him in the mortgage, however I understand this is not a reason to do it.

professore wrote: »

However you should get more equity than him, no question. Probably a 65 / 35 or 60 / 40 split sounds fair.

This would be how I would have thought to do it, to just do a straight equity split and should any issues arise in future where house needs to be sold, it is clear the ownership

PhoenixParker wrote: »

Your wording "naturally is a touchy subject" suggests to me this is a bad idea, even with the tightest legal agreements.

You need to be able to communicate with your purchasing partner clearly, effectively, without fear or defensiveness.

If the most basic discussion about how to split ownership is already a touchy subject, that does not bode well for the future of your business or house sharing relationship.

Is not so much that it is a touchy subject but perhaps more so I understand he has been trying to put together a deposit but has had several bereavements and other health issues which have limited this, and I tend to avoid conflict as a whole

the_syco wrote: »

So, same salaries, but you can save better? Who's idea was it to join up?

Well I earn about 30% more than him but both on good salaries in good sectors. Ive managed to save more due to a few good years of bonuses and also watching my cashflow. Was joint scoping really, so isnt him pushing this idea at all.

Thanks to all for comments and feedback. General consensus seems to be to not to to go down that avenue, which seems to be the way to go. Would hate to have any issues down the line and be worried should he, as other posters here have said, lose his job, get married etc and walk away from house.

Guess does make me think how others handles a similar situation with their GF/BF who are looking to buy. I imagine head down and keep saving and buy 50/50.

GingerLily

bigslick wrote: »

Guess does make me think how others handles a similar situation with their GF/BF who are looking to buy. I imagine head down and keep saving and buy 50/50.

The difference is, when you buy as a couple your generally hoping in the future that you'll be sharing all your assets.

What is going to happen with a property you buy with a friend in 10 years?

If your get nice bonuses, you'll probably want to pay off chunks of your mortgage, you can't really do that if your in a financial arrangement with a friend.

Buy a house or apartment and rent a room, up to 14k a year, tax free. Its by far the smartest option for you if you want to buy.

Klonker

Agree with others here, best thing to do is buy a 2 bed yourself and rent him a room, you can give him a friends rate of say 20-30% below market value. He can't complain about that.

bigslick

bigslick wrote: »

Guess does make me think how others handles a similar situation with their GF/BF who are looking to buy. I imagine head down and keep saving and buy 50/50.

I don't think this is at all comparable to buying with a friend. You don't share your assets with your friend. If you go ahead with this, sooner or later one of you is going to get to the point where the arrangement doesn't suit anymore. Be it one of you meets a partner, decides you want kids, gets a huge boost in salary, get offered a job in Singapore, etc. And I think you're nuts if you do anything but go in on a 50/50 basis.

the_syco

bigslick wrote: »

Is not so much that it is a touchy subject but perhaps more so I understand he has been trying to put together a deposit but has had several bereavements and other health issues which have limited this, and I tend to avoid conflict as a whole

bigslick wrote: »

Guess does make me think how others handles a similar situation with their GF/BF who are looking to buy. I imagine head down and keep saving and buy 50/50.

The difference between mates and loved ones, is that if the loved one loses their job, you'll support them until they get back onto their feet.

If your mate gets ill, and can't pay their share or the mortgage, I doubt you'll be fine with them not paying their share.

Also, if one of you gets a partner that you want to marry, one of you will need to buy out the other.

ldy4mxonucwsq6

You don't have to look far in this forum to see how people have run into problems with what you are considering.

Would strongly advise against this, anyone I know who has done this has ended up badly.

Tough it out for another while and then get your own place, you'll be glad you did.

Think forward 5 or 10 years, what will you think about having a mortgage (not a house, a mortgage) with your friend then?

What if they meet someone or you meet someone, can you agree and afford to buy each other out? What if you want to sell in the future and they don't? If both aren't in agreement you'll end up in court and much less well off financially as a result.

LawBoy2018

Can we bring this thread back? I would be very interested to hear people's thoughts.

Would buying a 2 bedroom apartment with a friend as tenants in common be such a bad idea?

Padre_Pio

LawBoy2018 wrote: »

Can we bring this thread back? I would be very interested to hear people's thoughts.

Would buying a 2 bedroom apartment with a friend as tenants in common be such a bad idea?

Buying anything with someone who you have no hold over is a bad idea. Someone needs to be able to unanimously make a decision.

Couples buy together as it's understood they will live in the house together indefinitely.
But two friends will rarely live together when one finds a partner, so what happens then?

LawBoy2018

LawBoy2018 wrote: »

Can we bring this thread back? I would be very interested to hear people's thoughts.

Would buying a 2 bedroom apartment with a friend as tenants in common be such a bad idea?

Did you read the thread?????

LawBoy2018

bubblypop wrote: »

Did you read the thread?????

I did! I would love to discuss it further though. There didn't seem to be anyone in the thread who had actually bought a property with their fried, bar one poster who bought one with their 'partner'(?), I'm not sure if she/he meant like a business partner/friend or an actual partner.

xl500

Don't do it recipe for future woes

LawBoy2018

Padre_Pio wrote: »

Buying anything with someone who you have no hold over is a bad idea. Someone needs to be able to unanimously make a decision.

Couples buy together as it's understood they will live in the house together indefinitely.
But two friends will rarely live together when one finds a partner, so what happens then?

What do you mean by 'hold over'? Isn't that what contracts are for? But I take your point.

Yes, I agree. That would definitely need to be discussed straight away. Would banks even consider it though? Especially in light of the current circumstances.

I would be more interested in buying a property as an investment, rather than one to live in tbh. Would it be best to set up an Ltd company? That way we could claim back any capital allowances available from renovations against rental income, if we were to rent it out. We could also claim back mortgage interest, management fees, etc. We wouldn't necessarily need to set up a company to do that, but it might be less risky.

Markcheese

Just to confuse the issue , if everyone goes in eyes open and with everything written down and agreed , why not ..
I mean if you buy a house with a romantic partner ,you can't really bring up "what if we split " and if married well what ever was agreed pre purchase is null if there is a split ... (And get that's the "accepted way ", to joint buy a house ...
But be aware of the probs what if one party's girlfriend moves in ,and that causes a prob ...
The get out clauses , !! 1 party really wants to keep the house , how do you agree a price / value ...
How much time do ye have to sell ? ( A distant family member was forced to sell a property he "got" from family members , so sold it during a bank strike ) ( long time ago )
What if there's negative equity ?
**** it ...who gets the ",big room "

MissShihTzu

No. Absolutely not. It will be a recipe for disaster. No matter how well you get on...

LawBoy2018

MissShihTzu wrote: »

No. Absolutely not. It will be a recipe for disaster. No matter how well you get on...

Do you have any horror stories? Personally, I have never heard of two friends buying a house together.

MissShihTzu

LawBoy2018 wrote: »

Do you have any horror stories? Personally, I have never heard of two friends buying a house together.

Yes, but it's one from London where I am from and dates back to the 80's. The principle was the same. It didn't end well. I also have personal experience but that was buying with a boyfriend.

LawBoy2018

MissShihTzu wrote: »

Yes, but it's one from London where I am from and dates back to the 80's. The principle was the same. It didn't end well. I also have personal experience but that was buying with a boyfriend.

How did it end up? Were you joint tenants, or tenants in common?

MissShihTzu

LawBoy2018 wrote: »

Do you have any horror stories? Personally, I have never heard of two friends buying a house together.

I would suggest reading the below...

godtabh wrote: »

Look at the horror stories here from celctic tiger era situations similar to yours. I wont do it.

A search of the thread will turn up similar stories, I am sure...

Padre_Pio

LawBoy2018 wrote: »

What do you mean by 'hold over'? Isn't that what contracts are for? But I take your point.

Yes, I agree. That would definitely need to be discussed straight away. Would banks even consider it though? Especially in light of the current circumstances.

I would be more interested in buying a property as an investment, rather than one to live in tbh. Would it be best to set up an Ltd company? That way we could claim back any capital allowances available from renovations against rental income, if we were to rent it out. We could also claim back mortgage interest, management fees, etc. We wouldn't necessarily need to set up a company to do that, but it might be less risky.

Maybe, the point is that couples who buy usually share all their problems, including financial.

But friends or family don't.

Ok, so say this is an investment, you're going to rent it.
Say your business partner needs money for some reason and needs to cash out of this investment? What if you don't want to sell? What if you can't buy him out?

What if one of you decides to relocate to another part of the country? The one living closest is left dealing with all the hassle of managing tenants.
What if you want to spend x thousand sprucing the place up and he's content being a slum lord?

Obviously many people have very amicable partnerships with friends, but don't go into this thinking things are rosy. You could be partners in this investment for decades.
It's these sort of things where one person needs to have the overriding say in the matter. A 50/50 split means you need to agree on everything.

LawBoy2018

Padre_Pio wrote: »

Maybe, the point is that couples who buy usually share all their problems, including financial.

But friends or family don't.

Ok, so say this is an investment, you're going to rent it.
Say your business partner needs money for some reason and needs to cash out of this investment? What if you don't want to sell? What if you can't buy him out?

What if one of you decides to relocate to another part of the country? The one living closest is left dealing with all the hassle of managing tenants.
What if you want to spend x thousand sprucing the place up and he's content being a slum lord?

Obviously many people have very amicable partnerships with friends, but don't go into this thinking things are rosy. You could be partners in this investment for decades.
It's these sort of things where one person needs to have the overriding say in the matter. A 50/50 split means you need to agree on everything.

Great input, thanks for that!

Padre_Pio

LawBoy2018 wrote: »

Great input, thanks for that!

I'll admit that I'm not in this situation, I know of a few people who are, and it's working out for them, but it comes down to the fact that people change over time.
Their needs, outlook, priorities etc change, and unless you're in sync, there's a chance for disagreements and disagreements over money are never good.

3DataModem

Markcheese wrote: »

J
I mean if you buy a house with a romantic partner ,you can't really bring up "what if we split " and if married well what ever was agreed pre purchase is null if there is a split ...

There's a whole bunch of law, legal precedent, and stuff specifically for the romantic partner scenario. For others, there is not.

This is one of the reasons why the 34th amendment was so important to some people.

jetfiremuck

The purchase can be done provided a robust legal framework is attatched. Items like min length of ownership before a sale or get out can be triggered. The splitting of utilities relating to the properrty as in LPT, and other legal requirements (that could affect the property legally). Should life insurance policies be considered etc.
If there is a good working relationship and professional relationship established between you then Id see no issue. People moving in as in tenants etc is another kettle of fish.

Partnerships are part of business and all aspects of life today.

Graham

[QUOTE=Padre_Pio;114897278Their needs, outlook, priorities etc change, and unless you're in sync, there's a chance for disagreements and disagreements over money are never good.[/QUOTE]

One of the biggest problems is it's not just the co-owners that need to be in synch. The future partners, and the markets also have to co-operate.

Imagine the scenario:

you and a mate/sibling bought a house together 8 years ago. You moved out 2 years ago to shack up with long-term partner in a rental. Your mate still lives in the house. You and new partner want to buy a house together but you can't get a mortgage as you already have one. Market has burped so house is worth less than the outstanding mortgage, should recover its value in the next 5 or 6 years.

It's not far fetched. I'm sure we've more than a few threads along those lines knocking around here somewhere.

LawBoy2018

Graham wrote: »

One of the biggest problems is it's not just the co-owners that need to be in synch. The future partners, and the markets also have to co-operate.

Imagine the scenario:

you and a mate/sibling bought a house together 8 years ago. You moved out 2 years ago to shack up with long-term partner in a rental. Your mate still lives in the house. You and new partner want to buy a house together but you can't get a mortgage as you already have one. Market has burped so house is worth less than the outstanding mortgage, should recover its value in the next 5 or 6 years.

It's not far fetched. I'm sure we've more than a few threads along those lines knocking around here somewhere.

But a tenant in common can sell his/her share if they so wish. If the housemate didn't want to sell, he would have the option of buying me out. If he was being awkward + refused to cooperate, I could just make an application to the courts to force a sale.

Padre_Pio

LawBoy2018 wrote: »

But a tenant in common can sell his/her share if they so wish. If the housemate didn't want to sell, he would have the option of buying me out. If he was being awkward + refused to cooperate, I could just make an application to the courts to force a sale.

Friendships and solicitors letters don't mix

LawBoy2018

Padre_Pio wrote: »

Friendships and solicitors letters don't mix

I'm just looking at this from an objective perspective. My point is that if things were to go sour, there are avenues available. I think we're all in agreement with the prospect that if two people were to enter such an arrangement, their friendship would need to be parked at the door + all contracts/paperwork would need to be bulletproof and cover every possible scenario.

Now, on to the next part!

I worked with the legal team in BOI for a while and I never came across any mortgage applications between two friends. How would banks perceive such arrangements? How would they factor in the added risk (if any)?

The nub of all of this would be whether the applicants actually planned on living in the property, imo. (this wouldn't be the case for me, but I would still love to hear people's thoughts)

LawBoy2018

LawBoy2018 wrote: »

I think we're all in agreement with the prospect that if two people were to enter such an arrangement, their friendship would need to be parked at the door
)

This is the reason it would never work...friendships cannot be just parked at the door.....
there are avenues to go through if it goes tits up alright but have a look through boards and all the threads from people who have tenants who refuse to move...they have legal avenues available as well but it’s costly and immensely stressful...not worth it at all imo

Graham

LawBoy2018 wrote: »

But a tenant in common can sell his/her share if they so wish. If the housemate didn't want to sell, he would have the option of buying me out. If he was being awkward + refused to cooperate, I could just make an application to the courts to force a sale.

What if the friend couldn't sell because they couldn't meet their share of the shortfall in the mortgage.

Joint & several. Are you going to meet the shortfall?

Will the bank agree to the sale if neither of you agree to meet the shortfall?

What if the friend decides to be 'off-putting' to any potential purchasers? More Court costs? Who pays those?

I'm deliberately playing devils advocate here because (my admittedly vague recollection of clearly anecdotal evidence) tells me we've had posts along these lines before.

How many of these scenarios/eventualities can you reasonable protect yourself against with a contract?

LawBoy2018

LawBoy2018 wrote: »

But a tenant in common can sell his/her share if they so wish. If the housemate didn't want to sell, he would have the option of buying me out. If he was being awkward + refused to cooperate, I could just make an application to the courts to force a sale.

You read some mad stuff on this forum.

LawBoy2018

Addilynn Unimportant Warship wrote: »

You read some mad stuff on this forum.

Why contribute if you have nothing to add to the conversation?

LawBoy2018

Graham wrote: »

What if the friend couldn't sell because they couldn't meet their share of the shortfall in the mortgage.

Joint & several. Are you going to meet the shortfall?

Will the bank agree to the sale if neither of you agree to meet the shortfall?

What if the friend decides to be 'off-putting' to any potential purchasers? More Court costs? Who pays those?

I'm deliberately playing devils advocate here because (my admittedly vague recollection of clearly anecdotal evidence) tells me we've had posts along these lines before.

How many of these scenarios/eventualities can you reasonable protect yourself against with a contract?

I'll do some research and get back to you on this later! Thanks for the great input.

martinstacks

@LawBoy2018 any luck with this idea?

A few of us are looking in to this. There are many people or friends who have saved up some money during the pandemic and consider this a viable opportunity. By involving a number of people you share the risk and also add in extra skills and expertise...

Of course there will be legal agreements outlining the arrangement.

The Company option seems the most viable.

James 007

Would a bank give each of you a loan to buy a house together. If you dont need a bank what would be a likely arrangement for selling up later or buying each other out etc.