Joint Ownership of Property When Buying Real Estate
Real estate investment offers great ways to accumulate wealth over time. Sometimes when it’s tough to go solo, it makes better sense to invest in property jointly with a group, pooling in money together. However, that comes with its own set of complications if you are without professional guidance. Many investors and first time buyers in Mississauga question me on joint property ownership. One frequently asked concern is what happens if one of the partners turned owner does not survive?
Sometimes two investors (usually friends or a group of friends) decide on property ownership in Mississauga, find it difficult to come up with an equal share of down payment. In such cases, both owners share the investment property in the same proportion of their down payments. But will that mean they will live happily ever after?
Here is more on joint ownership of property for home buyers
Step ahead with caution and care, consult your lawyer and accountant when planning property ownership in Mississauga
There are many reasons for buyers to invest in property jointly. Joint property ownership may be the solution when you are unable to tread solo into or out of the real estate market. Whether you are a buyer overwhelmed by escalating prices or an owner under the weight of financial over-extension, investing in property jointly may offer an acceptable alternative to being squeezed out of the real estate market.
Investing in property jointly with two or more related or unrelated individuals owning a property together could involve a non-resident co-owner, an investor, a group of investors or a live-in co-owner. Sometimes investors want to diversify their financial hold by buying properties jointly. In other cases, an investor might want to help another friend/relative to buy a property, but don’t wish to move in with them. When two or more people invest in a home, it becomes easier to gain a real estate foothold.
Whatever the reason, investing in property jointly may suit a variety of lifestyles. Since joint property ownership is easier to get into than out of, it is imperative to be cautious before making any commitments as a buyer or seller.
Before one ventures into buying a property with friends/relatives, you must agree on a few things first.
- What are the long-term and short-term objectives of each co-owner, and how can your combined objectives overlap?
- How compatible are your objectives and lifestyles?
- Is joint ownership the best way out on all levels to solve problems, meet objectives and achieve goals for both of you?
The safest and sanest way to approach joint property ownership in Mississauga as a buying strategy is to explore the legal relationship. It helps to find compatible partners before the search for the dream property begins.
Invest time in understanding the pros and cons, similarities and differences of the two types of joint ownership: tenancy in common and joint tenancy.
The primary difference between the two relates to the right of survivorship. In joint tenancy, upon the death of one joint tenant the asset passes to the other joint tenant and does not form part of the estate of the deceased. Joint tenancy is most common method of buying real property between spouses for assets such as real property. Joint tenancy creates the right of survivorship, when the spouse dies the property will transfer to the other spouse with ease.
In tenants-in-common, upon the death of one owner their share of the asset will form part of their estate and is distributed under the terms of their will. When an asset is held under tenants-in-common, each person owns a specific percentage.
Sometimes a parent can buy a property as “tenant in common,” and share with an adult child for mortgage qualification. For example, a share of 99% (child) and 1% (parent), would still qualify the child to receive 99% of $2,000 ($1,980) maximum housing land transfer tax rebate. This method is most common among friends buying a property together. As per Shaffiq Dar, a real estate lawyer in Mississauga, another common method of joint property ownership between unrelated parties is to form a corporation and purchase under the corporation, with the investors being shareholders in the corporation. However, in such a situation, it may be more difficult to obtain financing as the borrower/mortgagor will be the corporation.
I would strongly advise you to speak with your lawyer and accountant before you decide on joint property ownership in Mississauga.