Buying into a share of a property

[Roses]

A friend has offered for me to buy half of their house, which I can do by paying cash. It's attractive because I need somewhere to live and, as I've just sold my business, I currently have no income with which to pay a mortgage or rent. I also have no idea what to do next work wise, so I'm unsure about how long I'll be without a cash flow.

I'm unsure how to go about this however. Will I need my name on the title, will I need a Property Relationship Agreement, I presume I'll have to include it in my will etc etc? Any help/advice greatly appreciated. Thanks

[Nick G]

You should pay for some professional advice. My accountant could help you and she's an investor as well - email nick[at]ifindproperty.co.nz

[Rosco]

Hi Roses,

You need to talk to a lawyer to make sure you are protected.

You would need to make sure the friend's bank only has security over the friend's half of the property, and that your half is unemcumbered. Your lawyer should be able to help with this.

You would also want to do full due dilligence on the property, just as if you were buying a new property.

You will still have costs and outgoings. ie your share of the rates, insurance, repairs etc

Ross

[Roses]

Thanks Nick

[Roses]

Thanks Ross, some good points which I'll certainly follow through with.

[Wayne]

You would need to make sure the friend's bank only has security over the friend's half of the property, and that your half is unemcumbered. Your lawyer should be able to help with this.

Would the bank allow this?
Wouldn't it mean they couldn't force a mortgagee sale if needed - hard to sell half a house?

[Rosco]

I'm not 100%, and definitely something for Roses to discuss with their lawyer. If friend's bank has all security, then friend could borrow more, or use as security for another property! Which would be a big risk for Roses

[Roses]

Thanks for the useful responses. I was assuming (naively, perhaps) that my friend would break his fixed loan, I'd pay my money to him/his bank (half the value of the house), then he'd refinance for the remainder of the mortgage. So, he'd then have half the mortgage to repay and I'd have none - only my share of the expenses (rates, insurances, etc). A lawyer would write up a Relationship Property Agreement declaring my half interest in this property, it would be included in my will and I'd somehow get my name on the title. Am I on the right path please?

[John the builder]

does forming the property into a company and buying shares work in these cases?

[Wayne]

So, he'd then have half the mortgage to repay

And the bank would have call over the whole house - not half of it.