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Looking to buy a property with friends
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LukeH-8
Posts: 1 Newbie
Hi All,
Thank-you in advance for any assistance with this.
My situation is as follows.
I am currently 24 years old, working FT, living with parents (paying rent and certain expenses). Like many young adults, I am struggling to put funding together in order to get onto the property ladder.
Recently I have been speaking with 2 close friends (both same age range, both working FT), and we have taken a view that it may be more beneficial for us to consider buying a property together, instead of renting. Neither of us own property, so this would be our first time buying. The rationale behind this is that, at the point where we can all agree to sell, we should then have enough funds to support a deposit for a mortgage of our own. This idea is still in the very early stages, and we are trying to be realistic with time frames (with a view to moving out sometime in 2019).
I have been trying to do as much research as possible on this as early as possible, so we can meticulously plan our approach to this to ensure that we are all protected and taking the correct action (and being mindful that buying may not be the correct action at this time and we could be barking up the wrong tree!).
Therefore I was wondering if anyone can provide assistance on a number of matters which will impact this, such as (but not limited to):
- Help to Buy / Government Schemes - I've heard that there are two forms of Help To Buy Schemes, one of which is good and the other is to be avoided at all cost. I've only heard about this through word of mouth, so any clarity on this would be helpful, and also whether this applies in instances such as out own (i.e. more than 2 owners). One of my friends also believes that there is a scheme that the government puts down a deposit for you, which is to be paid off over 5 years. If this is true, is this contained within one of these help to buy schemes, and is it a better way to go, or should we just save and buy later? I am also aware of various Help To Buy ISAs that banks offer to help in saving for a deposit. What should we consider before signing up to one, and are there any particularly good ones to look into, and any ones to avoid?
- Mortgages - I've looked online and it has been difficult to find mortgages providing sufficient finance (in some cases even with a greater deposit) (though I appreciate that I haven't had an opportunity to go into a branch and discuss this with providers). Most online tools for mortgage calculations only consider a joint 2-person mortgage, where we would be seeking a 3-person. Another consideration I have is that if one of us was to move out, and we would seek to rent their room out to cover expenses - does taking out a mortgage become affected by this, or is it not possible over certain mortgages? If anyone know of any mortgages that offer reasonable terms to group purchases AND allow for renting of rooms, then that would be helpful.
- 3 or 4 bed - In analysing what is currently on the market, I have identified that whilst there are only three of us, it may be more beneficial to buy a 4 bed. I have found that many 3 bed properties have a large master room and a small third bedroom (often not even capable of comfortably fitting a double bed), however more 4 bed houses appear to have three more similarly sized rooms, and one smaller one. Can anyone provide guidance on what the implications may be of choosing one of the other (we are looking in the price range of £200-300k in the North Bristol area, but this will largely be dependant on what we can obtain in a mortgage. As of my checks yesterday, I couldn't find a 4 bed at any price under £250,000). Alternatively, is it potentially a better option to buy a 3 bedroom property and consider amending the internal structure to standardise room sizes - is this a more cost effective alternative? (Initial thoughts are that buying a 4 bed would be better than buying a 3 bed and having work done).
- Practical implications - Many a guide I have read outline that we should have agreements in place in advance of going ahead with anything, to cover any kind of disputes or circumstances that may occur (such as one of us choosing to move elsewhere, or becoming unemployed). We all generally get on well, so we don't necessarily need to be overly controlled by an agreement, but the main focus would need to be on the important matters, such as mortgage repayments, what to do if anyone is to move out early, and covering of bills etc. I was wondering if there are any less thought about instances that we may not be aware of at this time, that may be helpful (if anyone has personal experiences of this then that would be helpful!).
- Other fees / Types of ownership - I am aware of the recent changes in the SDLT threshold, and we aren't seeking a property over the £300,000 mark in any event to be affected by this, however as this would be our first time in purchasing, any guidance on other fees we can expect in the actually process of buying would be helpful, such as what we could expect in solicitors fees, and any other fees that we may need to pay. Though this isn't always clear on the house selling pages, I believe that the properties that we are looking at are freehold, but I am aware of the differences in relation to buying leasehold (though I think we will be focusing on freehold properties). I am also aware that, quite often in the Bristol region, properties can be purchased as a "Floating Freehold" which I understand to mean that we own the house freehold, but not the land underneath (and therefore any minerals etc found on that land is not owned by us). Any clarification on this would also be helpful.
- Other - I cannot think of anything more specific at the time of writing this, however I'm sure that there may be other factors that we are unaware of at this time. If there are, direction on these would be most helpful. In any event, any guidance is always welcomed!
I am aware that this may be covered in numerous other pages, however I cannot find anything specific to jointly buying property with friends. If there is further guidance elsewhere, please let me know. I am trying to read up as much as possible before we are too far gone! I am also aware that I have asked many questions on varying topics in relation to this, so any assistance on one or more of these is most appreciated!
Many thanks!
Luke
Thank-you in advance for any assistance with this.
My situation is as follows.
I am currently 24 years old, working FT, living with parents (paying rent and certain expenses). Like many young adults, I am struggling to put funding together in order to get onto the property ladder.
Recently I have been speaking with 2 close friends (both same age range, both working FT), and we have taken a view that it may be more beneficial for us to consider buying a property together, instead of renting. Neither of us own property, so this would be our first time buying. The rationale behind this is that, at the point where we can all agree to sell, we should then have enough funds to support a deposit for a mortgage of our own. This idea is still in the very early stages, and we are trying to be realistic with time frames (with a view to moving out sometime in 2019).
I have been trying to do as much research as possible on this as early as possible, so we can meticulously plan our approach to this to ensure that we are all protected and taking the correct action (and being mindful that buying may not be the correct action at this time and we could be barking up the wrong tree!).
Therefore I was wondering if anyone can provide assistance on a number of matters which will impact this, such as (but not limited to):
- Help to Buy / Government Schemes - I've heard that there are two forms of Help To Buy Schemes, one of which is good and the other is to be avoided at all cost. I've only heard about this through word of mouth, so any clarity on this would be helpful, and also whether this applies in instances such as out own (i.e. more than 2 owners). One of my friends also believes that there is a scheme that the government puts down a deposit for you, which is to be paid off over 5 years. If this is true, is this contained within one of these help to buy schemes, and is it a better way to go, or should we just save and buy later? I am also aware of various Help To Buy ISAs that banks offer to help in saving for a deposit. What should we consider before signing up to one, and are there any particularly good ones to look into, and any ones to avoid?
- Mortgages - I've looked online and it has been difficult to find mortgages providing sufficient finance (in some cases even with a greater deposit) (though I appreciate that I haven't had an opportunity to go into a branch and discuss this with providers). Most online tools for mortgage calculations only consider a joint 2-person mortgage, where we would be seeking a 3-person. Another consideration I have is that if one of us was to move out, and we would seek to rent their room out to cover expenses - does taking out a mortgage become affected by this, or is it not possible over certain mortgages? If anyone know of any mortgages that offer reasonable terms to group purchases AND allow for renting of rooms, then that would be helpful.
- 3 or 4 bed - In analysing what is currently on the market, I have identified that whilst there are only three of us, it may be more beneficial to buy a 4 bed. I have found that many 3 bed properties have a large master room and a small third bedroom (often not even capable of comfortably fitting a double bed), however more 4 bed houses appear to have three more similarly sized rooms, and one smaller one. Can anyone provide guidance on what the implications may be of choosing one of the other (we are looking in the price range of £200-300k in the North Bristol area, but this will largely be dependant on what we can obtain in a mortgage. As of my checks yesterday, I couldn't find a 4 bed at any price under £250,000). Alternatively, is it potentially a better option to buy a 3 bedroom property and consider amending the internal structure to standardise room sizes - is this a more cost effective alternative? (Initial thoughts are that buying a 4 bed would be better than buying a 3 bed and having work done).
- Practical implications - Many a guide I have read outline that we should have agreements in place in advance of going ahead with anything, to cover any kind of disputes or circumstances that may occur (such as one of us choosing to move elsewhere, or becoming unemployed). We all generally get on well, so we don't necessarily need to be overly controlled by an agreement, but the main focus would need to be on the important matters, such as mortgage repayments, what to do if anyone is to move out early, and covering of bills etc. I was wondering if there are any less thought about instances that we may not be aware of at this time, that may be helpful (if anyone has personal experiences of this then that would be helpful!).
- Other fees / Types of ownership - I am aware of the recent changes in the SDLT threshold, and we aren't seeking a property over the £300,000 mark in any event to be affected by this, however as this would be our first time in purchasing, any guidance on other fees we can expect in the actually process of buying would be helpful, such as what we could expect in solicitors fees, and any other fees that we may need to pay. Though this isn't always clear on the house selling pages, I believe that the properties that we are looking at are freehold, but I am aware of the differences in relation to buying leasehold (though I think we will be focusing on freehold properties). I am also aware that, quite often in the Bristol region, properties can be purchased as a "Floating Freehold" which I understand to mean that we own the house freehold, but not the land underneath (and therefore any minerals etc found on that land is not owned by us). Any clarification on this would also be helpful.
- Other - I cannot think of anything more specific at the time of writing this, however I'm sure that there may be other factors that we are unaware of at this time. If there are, direction on these would be most helpful. In any event, any guidance is always welcomed!
I am aware that this may be covered in numerous other pages, however I cannot find anything specific to jointly buying property with friends. If there is further guidance elsewhere, please let me know. I am trying to read up as much as possible before we are too far gone! I am also aware that I have asked many questions on varying topics in relation to this, so any assistance on one or more of these is most appreciated!
Many thanks!
Luke
0
Comments
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Honestly this sounds like a recipe for absolute disaster, that's even if you can find a lender that will give three friends a mortgage between them.
There's so many things you'd all need to agree on, how to run the house, bills and ultimately when to sell. What if it's the right time for two of you and you're desperate to release your equity and you can't because your friend won't sell?
Either stay with your parents and build a bigger deposit, which I think is probably the best solution or if you're desperate for your own place then rent with your friends.0 -
HTB - Not really worth it for 3 friends that are looking to maximise return when/if you sell.
Mortgages - speak to a good whole of market broker.
3 or 4 bed - stick to your budget and buy what you can afford be it 3 or 4 bed.
Agreements - everyone needs to be equal and have an exit strategy to keep it simple - everyone needs to know that they are tied in for at least the fixed mortgage term. Equal deposit and repayment amounts even though they may have a few m2 less bedroom than the other person. Equal amounts to put into fund for repairs and maintenance.
Buy freehold - nothing else. Get a quote from a solicitor in your area - explain they will be 3 purchasers.
Stamp Duty - you can do your research on the Government site to work out that cost.
Good lucks - its probably the cheapest way to buy a property for the first time.0 -
Mortgage. See a broker as it's a non-standard scenario.
Mutual agreements. Draw up a Deed specifying
* who owns how much
* how responsibility (financial and practical) is to be apportioned
* how the agreement can/will be ended
Consider every single potential future scenario, agree what would happen, and document it eg
* 1 or more of you fall out and you can no longer live together
* 1 or more gets a partner who wants tto move in
* 1 of you marries. Then divorces. The ex-spouse maakes a claim on the property
* 1 of you dies
* 1 of you loses their job and can no longer contribute
* 1 of you decides to take a year off travelling
* 1 of you wnts to replace the boiler which keeps breaking down - the others don't want the expensse
* 1 of you wants to buy elsewhere with their new partner (or inherits some money and wants to buy alone/whatever) and the other 2 don't want to sell
* and on and on and on...............0 -
The reason why there isnt any guides is becuase its generally a bad idea.
Youre looking at a short term solution to a long term problem. Im also struggling to see any benefit to you. Yes your costs are a 1/3 but then any savings/gains are only a 1/3. If you want to move up the ladder as they say you wont be going from a 1/3 of a house to a whole house youll be going from a 1/3 of a house to a nicer 1/3 of a house in terms of affordability.
As a taste as to how this might go ask your friends to meet you every tuesday evening and see how long it takes before someone drops out.
Everyone thinks their friends are the best, theyre friends. Ive got good friends. I organised an overnight stay at thorpe park. This was planned and booked 6 months in advance. One by one they all dropped out. Someone booked a holiday, someone forgot it was a relatives birthday and the other person didnt techinically drop out but they also didnt mention it when the date came around. This is something they where all keen to do and would all enjoy and a total commitement of 2 days and £40. Yet reality of life and prioritising their needs meant we never went. Fortunately im not stupid so i paid the cancellation fee so i could get my money back. That isnt an option with a house unfortunately.0 -
- 3 or 4 bed - In analysing what is currently on the market, I have identified that whilst there are only three of us, it may be more beneficial to buy a 4 bed. I have found that many 3 bed properties have a large master room and a small third bedroom (often not even capable of comfortably fitting a double bed), however more 4 bed houses appear to have three more similarly sized rooms, and one smaller one. Can anyone provide guidance on what the implications may be of choosing one of the other (we are looking in the price range of £200-300k in the North Bristol area, but this will largely be dependant on what we can obtain in a mortgage. As of my checks yesterday, I couldn't find a 4 bed at any price under £250,000). Alternatively, is it potentially a better option to buy a 3 bedroom property and consider amending the internal structure to standardise room sizes - is this a more cost effective alternative? (Initial thoughts are that buying a 4 bed would be better than buying a 3 bed and having work done).
Have you set your budget at £300k max due to the stamp duty changes?
I'll leave the other questions as others will answer those. North Bristol is a large place - any specific areas you will be looking in?
I used to live near the city centre so I know how expensive Bristol can be.
As for buying a 3 bed and turning it into a 4 bed, that would require planning permission, plus the space internally to be able to create a new stairway/second floor to get a loft conversion. Will you collectively have circa £25k upwards to pay for this in addition to paying your monthly mortgage payments?
You wouldn't really be able to create bigger room sizes without taking away from another room. Plus you would also need to find out whether it would be possible to move walls in the first place e.g. if they are load bearing walls etc. in which case it would be a non-starter.
You would be far better off with a 4 bed, rather than 3 for the reasons you already mentioned (1 large master bedroom, 2nd bedroom ok sized and third bedroom is essentially a box room). I can't see how if there were 3 of you putting in for this mortgage how you would decide who gets the box room so a 3 bedder is out.
As for 4 bedroom houses in Bristol, well, I think you'll find on your budget that is pretty much going to be non-existent. The price range seems to be £325-350k for a 4 bed terraced/semi detached house from a quick RM search.I'm a Board Guide on the Credit Cards, Loans, Credit Files & Ratings boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views are mine and not the official line of moneysavingexpert.com0 -
I'd rather a 1 bed flat on my own than a 3-4 bed house with friends (and I'm not someone who usually recommends 1 bed flats to anyone and would always buy FH over LH).
So much can go wrong, some of which has been mentioned above. Not to mention recession or price drops. There is certainly no guarantee prices will rise. I once bought a house (in London) and did the whole thing up, new kitchen, roof, boiler, the lot. Price rose drastically in the first year or two, then fell back down to what it I paid for it. Sold several years later for pretty much the same price (would prob have been cheaper for me to rent during those years taking into account all I paid in moving costs, refurb and mortgage interest/fees, etc). The market has since flipped again and it's more or less worth double (within around 4 years).
Three is often a funny number when it comes to friends and sharing stuff and treating each other equally...
Have you ever all been on holiday together for 2 weeks or more?2024 wins: *must start comping again!*0 -
Three is often a funny number when it comes to friends and sharing stuff and treating each other equally...
And when you add in three potential partners/spouses, it gets even more complicated.
You might be sure of how your mates will behave now but will they change if they start getting pressure from their significant others?0 -
I personally would never do this. So many things can change that can affect a friendship - what is one of you wants a partner to move in? What if one of you wants to move out with a partner and the other two don't want to sell? Surely it would be better to save everything you can while living at home and then get your own place? Or houseshare as renters first to find out if you can even live together? Some people are really great until you have to live with them! Could avoid a very expensive mistake!
If you do decide to go ahead with this, make sure you have a solicitor draw up the correct legal deeds to cover every eventuality. Good luck!0 -
Candyapple wrote: »As for 4 bedroom houses in Bristol, well, I think you'll find on your budget that is pretty much going to be non-existent. The price range seems to be £325-350k for a 4 bed terraced/semi detached house from a quick RM search.
Agree with this. I live in North Bristol/South Gloucestershire and we just bought a 3-bed house so I've done a lot of RM research lately (addict) and I think you will be definitely looking at over 300K for a 4-bed for sure.0
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