Thinking of buying with a friend, 50-50. Opinions needed.

adonis10

Ok, so we are considering putting down an equal deposit, lets say 30k each. There are a couple of things we disagree on and am looking for opinions.

a) Hypothetical figures - 30k each deposit, 450/month each mortgage. Say I want to save to do something so move out and rent out my room for 350/month. I think he should still pay 450 and I pay the excess 100. He disagrees and thinks it should be (900-350)/2 = 275/month each. My argument is that he'd be getting the benefits of living there, whereas I wouldn't.

b) He puts in 30k, I put in 60k. 900 mortgage. I obviously think that the mortgage is split 600:300/month, using the same ratio as the deposit.. He thinks it should be 50:50 but when we sell the profits are obviously split 1:2.

Thoughts?

poppysarah

You know if you disagree this much before you buy then it'll be a nightmare.

Carl31

what are you looking for? an investment, or somewhere to live?

At the moment the arguements seem to be arising due to mixing both matters

adonis10

Carl31 wrote: »

what are you looking for? an investment, or somewhere to live?

At the moment the arguements seem to be arising due to mixing both matters

Initially, somewhere to live but if I move out I'd obviously want to rent out a room.

What do you think to each dilemma?

Tixy

a) I definitely wouldn't be happy to agree to his version of the calculation. Yours is probably fairer, but if you are putting into your agreement that one of you can rent their room out I'd want something in the agreement that the remaining occupier has a say in who its rented to and kicking them out if needed - as they'll have to put up with living with them.

Sounds like you disagree on a fair bit so far. Make sure your agreement covers every single nstance you can think of (including things like negative equity at the time of selling, when one wants to sell and the other doesn't etc). Or maybe reconsider the idea altogether.

sirmosh

I obviously don't know the situation inside out but I think you should pay the same as him if it's owned 50:50, what you see as the benefit of living there I actually see as the disadvantage of owning a house but having to share it with a random lodger.

Arrangements like this are bound to end in disaster, especially when one of you wants to sell and the other can't afford their own place. You also need to think that because of the cost of moving you'll probably lose money on it if you want to sell in the next 5/6 years since you'll have paid off very little capital on your mortgage.

Also factor in that if he pays more on the mortgage he will own a bigger chunk of the house and this will be clear should it go to court if things get nasty over splitting the proceeds of a sale.

spadoosh

a) youd split the mortgage equally before any lodgings etc. so you'd both pay half no matter what, who is living there whatever.

b) if he did 50:50 unless stated in the contract and as far as im aware he would be entitled to 50% of the house.

c) dont do any, you cant even agree on a simple matter of divvying the mortgage costs and profits. How would you decide on works the property needs doing, furniture, utilities, tax never mind renting out to a lodger.

Either come up with better options or give up quick on the idea.

LandyAndy

The whole thing sounds like a disaster waiting to happen.

Carl31

adonis10 wrote: »

Initially, somewhere to live but if I move out I'd obviously want to rent out a room.

What do you think to each dilemma?

would you want to rent out the room? or would you want to sell up to get a deposit for your own place?

The market isnt exactly suggesting any profit will be made from any future sale either, so bear that in mind

Two people with very different circumstances and intentions, putting themselves into a massive commitment is probably asking for trouble

adonis10

Woah, I think you've all over-estimated the scale of the disagreement. It's early days in the talks, we've both never done it before so trying to decide how to go about it. Obviously all of this stuff will be decided and put into a contract so there'll be no issue later on. As for stuff like bills, well they'd be 50-50 between whoever is living there, be it him and me or him and a lodger. This is common sense and we agree on this. Of course he wouldn't expect me to pay for the water that someone else has used, and vice versa.

Good point about him owning more if he paid more of the mortgage, but I'd obviously have put in 30k extra so there may be some more complicated calculations here.

As for repairs etc., we're both logical people with common sense and would agree as we have the same mindset on this sort of thing. If there is a hole in the roof we pay to get it fixed. If a wall doesn't need to be re-painted but one of us insist that we want it painted then fine, that person can buy the paint and paint it; not an issue.

Re negative equity; well common sense would suggest that, assuming we both put in 30k and paid 50:50 mortgage, we'd share the loss. If we shared the mortgage but deposit was 30k:60k then as I'm taking more risk any profit would be split 1:2, as would any loss. Surely that's just common sense and basic math?

adonis10

Carl31 wrote: »

would you want to rent out the room? or would you want to sell up to get a deposit for your own place?

I would want to rent out the room, obviously. This shouldn't be an issue as I'd be happy for him to choose the person, as he'd be living with him/her. No, not sell up for a deposit on my own place as I have enough for this should I decide to do it.

Carl31 wrote: »

The market isnt exactly suggesting any profit will be made from any future sale either, so bear that in mind.

Is it suggesting that we'll make a loss, then?

Carl31 wrote: »

Two people with very different circumstances and intentions, putting themselves into a massive commitment is probably asking for trouble

They're not really very different circumstances; we both want to get on the ladder, we'd most likely put down the same deposit and if I got my own place we'd get someone in to rent, which would be in an agreement before buying. Before we commit to anything, we'd agree and put in writing how the mortgage would be split in the event of a tenant coming in. As long as there is a legally binding agreement in place, surely there'd be no issue?