Do you know your friend well enough to go through all their bank statements? And would you let them go through yours?
If not the answer is no, you probably shouldn’t buy a house together.
It’s hard trying to buy a house when you’re flying solo, and that’s why some people are teaming up with friends.
Which, overall, I think can be a good plan. It lets you pool resources, doubling your buying power just like you would if you were part of a couple.
Start your property search
Most houses are at least two bedrooms anyway, and plenty of first home buyers plan to have a flatmate to share the bills.
But it’s only a good plan if you do it right.
When things go wrong for a couple there is decades of divorce law and relationship property law to help them decide how things will be split up.
If you’re teamed up with a friend, it’s murkier.
Listen to the podcast on this topic and scroll down to listen to more podcasts in the series
That’s why experts will advise you to start by drawing up a contract for how the investment will work, and what both of you expect to contribute.
Part of it is legal, sure. You want everything written down so nobody’s in doubt on what was agreed.
But part of it is also a trick of the human mind. You need to do it for the same reason they tell you to write down your budget, not just think about it.
Everything looks different when written down. The act of writing it down and talking about it can clarify expectations, and make sure you’re on the same page.
It’s also worth vetting your friend (and letting them vet you) to make sure you’re each confident in how the other handles money.
That’s why it can be worth looking through each other’s bank statements; do they go into overdraft each month? Are there a lot of impulse buys?
You don’t have a joint account like many couples will, so you’ll need to give each other access to make sure you’re a monetary match.
Then it’s time to think about life.
What if one of you changes job, and has a change in salary? Or maybe one of you needs to change city, even country – or just wants to quit everything to travel the world.
Think about whether you’d want to sell everything, buy the other out, or try to find a new flatmate to cover the bills.
Don’t forget a plan for bills and maintenance. One clever Cooking the Books listener has already emailed in to say that they handled it by making sure maintenance around the house was logged, and people were paid for their time.
It might sound cold, but it’s actually a smart insurance strategy for if things fall apart. Nobody can claim they invested more and so are entitled to a bigger cut than originally agreed.
You can’t predict every weird and wonderful life event, but it helps to think through as many as you can before a situation is emotional. Emotion is kryptonite to money decisions.
These warnings don’t mean you shouldn’t do it. Buying a house should always be done carefully, and you should always have a clear strategy before teaming up with someone on any big investment.
But if this doesn’t sound like a level of detail you’re prepared to get into with your friend, then maybe rethink buying together.
Because there’s nothing like several hundred thousand dollars to strain a friendship.
- Frances Cook is the host of the personal finance podcast Cooking the Books. She is not a financial adviser, and all information is general in nature. For individual advice, see a financial adviser.
Listen to other episodes in the series:
How to make more money by being lazy
After an investment property? Time to think commercial
How to budget for a house deposit without depriving yourself
How first-home buyers can build their own unique solution
Could the rule of 100 turn around your fortunes?
Is NZ ready for first-home buyer landlords?
The tough talk you need to have when saving for a house
How to house hack your way to smaller household bills
Is now the time to get nervous about your KiwiSaver?
How to solve land headaches
Renovate or detonate?
Apartment v house
How to crush the debt
Tricks for paying off the mortgage faster
The power of location
Negotiating a mortgage
Saving for a deposit
Buy v rent
