When looking at buying your first investment property and looking at how to finance the purchase it can sometimes feel like an uphill challenge when it comes to fulfilling all of the bank’s requirements. You may have enough money saved for a suitable deposit but perhaps your income is not as high as they would like. Alternatively, you may have a high regular income, but have not been able to save a large amount of money for a deposit. In these cases, it may make sense to consider one of the property investment strategies of purchasing the property with another person – called joint ownership.
What Is Sole And Joint Ownership Of Property?
If you are a sole owner of an investment property it means that the home is registered in your name only. Any rental income you may receive from the property will be received by you, and any expenses relating to your investment will be offset against your income.[i] All decisions about the property will be made by you, including plans for selling it, renting it out or even in estate planning and passing it on to others. In this sense it is the least complicated method of investing in property.
Joint ownership and co-ownership is becoming more popular as the financial requirements for property investing rise and interest in the market in general increases. A joint venture partnership means that the property is registered in your name and that of your “partner/s”. Ownership of the property is split equally between two or more people, with the income from rent also divided equally, and any expenses related to the home also shared. The benefits of having a joint ownership arrangement include:
- Being able to purchase a property that one person on their own could not afford
- Sharing any risks of investment, and having shared responsibility for expenses, ongoing maintenance costs and contingency funds
- Sharing any decision-making responsibilities or tasks – this can be particularly beneficial for first-time investors
Other arrangements for the purchase of property with others include co-ownership, buying property through a company structure or buying through a trust. Co-ownership is where the property ownership is divided up amongst owners according to certain rules – for example, if one person has contributed a larger amount to the initial deposit or has a greater income then they may own a larger percentage of the property – including a larger share of the rental income as well as of the expenses. As one part of a long term property investment strategy these arrangements can be complex and require significant planning and maintenance to ensure they run smoothly.
When considering such arrangements if you are going to be investing in property it is important to have do your homework and create a property investment strategy. It is important to set realistic goals for yourself and your partner, and make sure that you are all on the same page when it comes to issues such as tenants and the timescale for selling. For those considering investing in property in a joint or co-ownership arrangement, experts suggest that they also always seek legal assistance in creating practical and suitable contracts as well as financial professionals to ensure the partnership is structured in the most tax-effective manner.