Interested in buying real estate in Vancouver with friends or family? It’s a great idea that’s becoming more popular in Vancouver. I’ve helped friends purchase real estate together and have many clients who have bought with their parents.
Co-ownership gives you the opportunity to afford more together than you can alone, which can lead to different opportunities – together you might be able to afford a house compared to each of you living in condos, which gives you both access to yards, garages, new neighbourhoods and detached vs strata ownership. There are different types of co-ownership and many things to consider. Buying with family is a little more intrinsic, but the following considerations should still be made.
Here’s a quick guide to some things to think about if you’re embarking on a co-ownership journey with friends or family. The following considerations should be made when you decide to purchase together and then again once you’ve found a property but haven’t yet contractually bought it! You’ll want to make sure you finalize any agreements and numbers prior to removing subjects on any property.
You and Your Co-Buyers
Who are you buying with? Your relationship and expectations will form the basis of your agreement and what kind of property you’ll need. Unfortunately side by side duplexes are few and far between so it will be difficult to find a property with two exact units. This means one party will have to compromise, though this may be an easy decision if the co-Buyers have different budgets. A few questions to consider when thinking about your co-Buyer:
- What is your current relationship? Do you have a strong understanding of how the co-Buyers currently live and maintain their home? How do you each handle conflict?
- Do you have similar lifestyles? This is important when it comes to noise, usage of the space and each persons list of wants and needs for their ideal home. Although you can buy any home and have terrible, noisy neighbours, buying with a friend who turns out to be a terrible neighbour is an expensive mistake that can lead to a fractured relationship.
- Do you anticipate any major life changes in the next few years?
- Can one party afford significantly more than the other or are your budgets fairly similar? Are you looking for two separate but comparable suites? Are you considering a co-living situation where you’ll share a kitchen and living space?
You should have an open and honest conversation with your potential co-Owner about these things. If you feel that you can’t be honest, then you shouldn’t buy with this person!
Budget and Mortgage
Like any real estate purchase, your budget determines what you can afford and where you can afford it. You’ll need to get approved for a mortgage together. Everyones assets, debts and income will be considered when it comes to what you can afford.
Vancity Bank offers a great Mixer Mortgage program for co-ownership. Any mortgage broker can offer mortgages for a co-buying situation, but Vancity has created a specific program for it that should help make the process easier from start to finish. I would suggest going to Vancity for an approval in addition to another mortgage broker so you can have a few different options to consider.
Considerations for the Home
In some scenarios the co-Buyers have equal budgets and are looking for fairly equal suites. In general, side by side duplexes would be the best option, but they are rare. Vancouver Specials are another fantastic option because the top and bottom suites can be fairly similar, aside from the fact that one Buyer will be on top of the other (leading to less light and more noise). There are some character houses that have been divided into suites that could work as well, but they are often quirkier and may require a little more give and take when it comes to the value of each unit. I know a set of co-Buyers who purchased a home with 3 suites: one Owner got the biggest suite, and the other owner got the two 1 bedroom suites and rented one out.
Perhaps the co-Buyers have significantly different budgets, and a typical detached home with basement suite would be the best option, given one co-Buyer in the basement and one in the main part of the house. You could also find a home with a laneway house.
You’ll also have to consider how to split the other spaces in the home: gardens, garages, patios, external storage, etc.
Considerations for your Legal Agreement
Getting a legal agreement between all co-Buyers is a must to ensure everyone understands the expectations of the group. There are going to be some general stipulations but the agreement will be tailored to you specific situation. For example, the agreement will differ if the co-Owners have separate units within the home vs co-Owners who share kitchen and living space, and the agreement may differ if one co-Owner lives in the property and one co-Owner rents out the property.
In co-Ownership situations, the title to the property is typically “tenants in common” vs “joint tenants”. This typically means that if one Owner passes away, their portion of the property is passed on to their estate, though this detail should be clarified with a Lawyer prior to purchasing a property.
Here are a few details that should be considered in every co-Ownership agreement:
- Outline each co-Buyers interest in the property, for example 50/50 if everything is shared equally. This is often based on interior sqft of each unit, but it can be calculated in any way as long as both parties agree. This percentage could impact each Buyers required down payment, future profit, share of expenses, etc. If two couples are buying together, this legal agreement will usually be between Unit 1 and Unit 2, and then a separate agreement should be done between the couple in each unit.
- Outline of any financial information regarding profit and expenses. You should also have a shared bank account where each party makes monthly deposits in order to pay for all house related expenses. You should also agree to prepare an annual operating budget for expenses and profit, including:
- Purchase costs (including property transfer tax and legal fees)
- Property taxes and any municipal fees
- Property insurance
- Hydro and gas (some properties will have separate connections)
- Fees for expected maintenance on the property (yearly gutter cleaning, gardening, fireplace maintenance, etc)
- A Contingency Fund for any unexpected maintenance
- If this is a rental property, the related profit and expenses
- Outline how property maintenance and repairs will be handled, in the event of expected maintenance and unexpected maintenance.
- What maintenance will each owner do and what will be done by a professional? Who will arrange the repairs? How many quotes will be gathered? Does each need to agree on the final decision? What if it’s an emergency? What if each Owner disagrees about what needs to be done?
- Outline who gets to use each part of the home, garage and exterior space and if there are any rules related to these spaces.
- Outline what happens if one Owner wants to do major renovations or improvements to their home, since this not only costs money but improves the value (and thus profit). Does the Owners percentage of profit change? Does the other Owner have a say in what renovations are done (since a quirky renovation would negatively affect the value of the home)?
- Outline how and when can the property be sold
- If only one party wants to sell, how will you handle the sale? Typically the remaining Owner has the right of first refusal to purchase the property but you’ll need to decide how you will come up with a reasonable price and how long the remaining Owner will have to complete the sale.
- If both parties want to sell, how will you handle the sale? How will you choose a realtor? How will you decide on price? How will you compromise if you disagree about an offer?
- Outline what happens if one party defaults on their portion of the mortgage
- Outline what happens if one unit will be rented, either immediately or in the future. How does this change how tasks are shared? Does the remaining Owner have a say in the chosen tenant?
- Outline any rules, including the number and type of pets, vacation rentals, smoking, etc.
Final Thoughts on Co-Ownership
I think co-Ownership is a great idea! It’s great for friends who want to live in a house-like property vs a condo (that’s me!) and great for families who want to stay close while getting older. There are lot of things to think about, but the if you can get through the nitty gritty details I’ve mentioned above then you’ll be on the right track when it comes to a successful and happy co-Ownership life.
Reach out to me at kristi@realestatevancity.ca if you have any questions or would like any recommendations to mortgage brokers or lawyers.
Cheers!