Owning Property with Someone Else

Benjamin Haas |

Maybe you inherited property with your sibling when Mom died. Maybe it’s your family friend, a long-term boyfriend or a committed partner. Whatever the circumstance, owning a home with an unmarried partner raises unique issues that should be dealt with before the closing. Fact is, owning real estate with people you like can become a major headache if you don’t share the same goals and take the time to do some upfront work.  

Here are some tips to help you enjoy your property and keep healthy relationships.

  • Determine how the property will be financed. 
If not a gift, and financing is required, consider how you’re going to acquire the property. You may know your partner/friend really well, but how well do you know their finances? Do they have the cash for a down payment or will they need a bank loan to cover their share? And what if the initial contributions aren’t equal (i.e. one person has cash for a down payment and the other doesn’t)? You could draft a partnership agreement that could clearly spell out the consequences of disproportionate capital contributions. The moral is that it’s important to gain assurance that all parties involved are making a financially sound decision before signing the documents.
  • How will you share the ongoing expenses and maintenance of a shared property? One option is to have partners split the bills when they come. Or, maybe you should consider having a joint account where everyone can contribute a lump-sum amount to be used as expenses arise. Also, who will be the primary contact responsible for maintaining the property and paying the bills?
  • Decide how you want the property titled
. Will you own it jointly or as an entity? A partnership agreement could help address potential issues in the future. Realize that instead of owning the property with your sibling or friend, you could, in the future own it with their children or their other family members.  So, it’s also important to discuss how future ownership should be handled in the event of a death or disability. If the property is going to be a rental property, a limited liability company or a corporation may be a better choice for ownership. Owning property jointly makes your half of the ownership subject to your partner’s creditors, should something go wrong.

Finally, the property is meant to be a positive joint venture, not a source of added stress and conflict with the person with whom you own the property. So, make sure to communicate and document your intentions regarding the financing and property usage ahead of time.  A CFP® professional can help you navigate this process, to ensure that the property – and the details surrounding it – stay a worry-free zone. 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Please consult a financial professional prior to taking any action.