With the cost of property in South Africa having increased significantly over the past ten years, and in the current economic climate which has seen banks tightening their lending requirements, many investors are opting to pair up with friends, family and colleagues to purchase secondary properties. If you’re considering this option as a means of investing in property more affordably, there are a few considerations to bear in mind:
Joint Mortgages Are Partnerships
Before you enter into a joint mortgage investment, remember that you will be forming a business partnership with whoever shares the mortgage. This means that your finances, along with those of the other mortgage applicants, will have to be in order and open to them – they are your partners now.
Even if you’ve known your prospective partners your whole life, and worked with them for ages, be selective who you choose to enter into a joint mortgage with. Good friends may not make good partners, and if your new partner is uncomfortable about revealing his or her finances to you, you may want to keep looking.
Take Steps to Protect the Investment
Owning a property means that you are liable for bond repayments, maintenance, and ensuring that the house or apartment you buy is occupied by a good tenant. When you own property in partnership with other investors, these responsibilities need to be shared equally. Make sure you have a written agreement that sets out each partner’s responsibility ahead of time so that no arguments can arise.
Similarly, one of your partners (or you) may be forced to abandon the investment, either for financial reasons or due to death or disability – you will need to make provision for this possibility. Each partner should be honest about his or her financial situation throughout the partnership and take out insurance that will cover their portion of the bond in case of their death or disability.