Buying with Friend

[emc]

I am thinking of buying a house with a friend. a few people have said that they don't think this is a good idea. I am only 28k though so don't really see that i have much option if i want to get a start on the property ladder. Has anyone bought a house with a mate and would they advise if its a good idea or not. Also what way would it work regards buying furniture etc?

 

[SteelBlue05]

Just make sure you have a written agreement between the two of you as to what happens in certain circumstances. Its a good idea if you are very sure of your friend. How is your friendship currently, are yee both easy going and willing to listen to each others side of the arguement? How long have you know each other?

You could agree to buy seperate pieces of furniture individually so you know who owns what or buy it all together and split the profits should you sell it etc.

 

[bacchus]

What happen :
if you want to sell and your friend does not (or can not) and does not have the money to buy you out?
if you or you friend can not pay the mortgage?
when you meet somebody (GF/BF)to live with ?
if one of you die?
if you fall over with your mate?
....
The list goes on and on and on.


I personally think this is a very bad idea to buy a PPR with a mate...


To be honest, at this stage, the furniture should be the last of your worries...

 

[RainyDay]

See here for the kind of agreement you'll need.

 

[emc]

Thanks for that. I do realise that there are a lot of issues & that an agreement would have to be in place for at least 3 years +. The previous thread was a good help too in regards what sort of agreement that would be drawn up. Would this have to be done by a solicitor? Obviously i would rather buy on my own but think this would be the best alternative. i have known my mate since we were in primary school so i don't think we would have too many problems though of course you can never tell.

 

[nelly]

my brother bought his house with his friend in London and his friend went on to buy another and mov out and rented his half to tenants, My bro was happy with this arrangement and now his friend is selling and bro has built up enough to buy his half of the house.
It does work but like everything friends and family fall out over land / property / money "neither borrower or a lender be" so if you want to do it, get the documents up crystal clear and communicate regarding the furniture, fittings etc Also it won't be your home, it will be your joint property.

 

[SteelBlue05]

This situation of buying with a friend is much better than wasting your money on rent (assuming you get your agreement in writing and clear to all).

At least you are also living with a good friend rather than some tenant you never knew. There comes a time when you get fed up of living with people you dont know. Go for it. The value of the property is very likely to increase so its also a good investment.

 

[bacchus]

This situation of buying with a friend is much better than wasting your money on rent (assuming you get your agreement in writing and clear to all).

"Rent is wasted money " . Sentence use and abuse for the last 100 years. The last time somebody mentioned that to me, i asked "why?"... Pure silence was the answer... Most people say it but can not explain why..

So, tell me why do you think it is a waste?

 

[brodiebabe]

"Rent is wasted money " . Sentence use and abuse for the last 100 years. The last time somebody mentioned that to me, i asked "why?"... Pure silence was the answer... Most people say it but can not explain why..

So, tell me why do you think it is a waste?

I would presume that most people think rent is wasted money because is is dead money. It is no form of investment as there is no extra return on it. Buying a house and paying a mortgage, however, means that you could be paying the same monthly amt for accom. and when you have your mortgage paid off you own a valuable property.

 

[SteelBlue05]

"Rent is wasted money " . Sentence use and abuse for the last 100 years. The last time somebody mentioned that to me, i asked "why?"... Pure silence was the answer... Most people say it but can not explain why..

So, tell me why do you think it is a waste?

I have a mortage of 1100 per month, when\if I sell the place I will make some money on it, not just get my money back. If I spend this on rent then I will not get any money back, its a waste of money. Its simple.

I mean, am I missing something?

What is the arguement to spend money on rent instead of a mortgage?

 

[Gordanus]

Other things to take into account: have you ever shared a house with your friend? Have you ever been on holiday together? Have you ever spent extended periods of time together? How different are your approaches to housework/cleanliness? How different are your work patterns/social life? How much are you going to be in each other's faces in the new home? Etc etc. I'd strongly advice sharing a flat with them before committing.

 

[emc]

no i have never shared with him before though we have gone on hols together. We got on fine then but realise that going on holiday is a lot different to living with someone. There is so many issues but a lot of these issues could as easily arrise if you were buying with a partner.

 

[casiopea]

So, tell me why do you think it is a waste?

For me, if you are paying more in rent than you would on interest on the principle of a mortgage then it is wasted money. If on the other hand your rent is lower than the interest you would have to pay on the mortgage then its not wasted money and you should bide your time before buying.

 

[SteelBlue05]

For me, if you are paying more in rent than you would on interest on the principle of a mortgage then it is wasted money. If on the other hand your rent is lower than the interest you would have to pay on the mortgage then its not wasted money and you should bide your time before buying.

That doesnt make sense to me. If you rent a place you will never get your money back. If you pay a mortgage you will more than likely get all your money back when you sell and more than likely make some money on the sale.

You say "bide your time before buying" - why would you do that, assuming a person can afford to buy, when prices have been increasing for the last, what, 10 - 15 years?

I guess you are waiting for the decrease in prices? The decrease that has been due about 5 years now? How much would someone have spent on rent in the meantime? e.g. at 450 per month for 5 years is €27,000. That is a waste pure and simple.

Now if you had spent that 27K on a mortage, you will get your money back plus more when you sell the place. Where has my logic gone wrong?

 

[casiopea]

That doesnt make sense to me. If you rent a place you will never get your money back.

I think you missed my point. Taking a basic mortgage (leaving endownment mortgages etc aside), you have principle and interest. Principle is going against your investment. Making the property your own. The interest however is just like rent you pay to the bank, its lost money, just like rent. So my point is, in response to bachus question above, for me I compare the interest I would pay to the rent I would pay. If the interest is higher, then the renting would be more attractive to me.

If you pay a mortgage you will more than likely get all your money back when you sell and more than likely make some money on the sale.

In fairness this is speculative, yes right now maybe, but there are no guarantees for the future.

I guess you are waiting for the decrease in prices?

No, interest rates.

 

[SteelBlue05]

In fairness this is speculative, yes right now maybe, but there are no guarantees for the future..

My specific case is based on Dublin prices. True it is speculative but its as specualtive as saying "I think the population will continue to grow" or "I think the prices of goods will continue to increase".

No, interest rates.

You are waiting for a decrease im Interest Rates, I thought they were going to go up? That would probably slow the rate of increase in house prices but I really cant see it decreasing the price of a house to 2000 or 2001 levels (which I assume you are hoping for something like this?). If you are looking at Dublin then thats just a unique situation, demand is way too strong there to reduce prices. Only hope for a sligjht slow down if interest rates increase.

 

[SteelBlue05]

I think you missed my point. Taking a basic mortgage (leaving endownment mortgages etc aside), you have principle and interest. Principle is going against your investment. Making the property your own. The interest however is just like rent you pay to the bank, its lost money, just like rent. So my point is, in response to bachus question above, for me I compare the interest I would pay to the rent I would pay. If the interest is higher, then the renting would be more attractive to me.
.

Right, I understand. A lot of the interest is paid off in the earlier part of a mortgage. e.g. a 270k mortage over 30years (2.95% tracker) requires you to pay 137k interest over the 30 years. Thats an average of 380 per month. You wouldnt rent much of a place in Dublin for that.

My calculations are probably missing lots of points\factors but it shows that there really is no logical reason to rent when you can afford to buy.

 

[bacchus]

there really is no logical reason to rent when you can afford to buy.

Is that not a new problem in Irish society? a lot of people CAN JUST ABOUT or CAN NOT really afford to buy. But nevertheless, lenders still throw insaine amount of money at them..
The smallest increase in rates, or the smallest decrease in their income would have a disastreous impact...

Like on any market, you have to have loosers to have winners...

 

[SteelBlue05]

Is that not a new problem in Irish society? a lot of people CAN JUST ABOUT or CAN NOT really afford to buy. But nevertheless, lenders still throw insaine amount of money at them..
The smallest increase in rates, or the smallest decrease in their income would have a disastreous impact...

Like on any market, you have to have loosers to have winners...

Its true, although I think most people would handle a 0.5% increase in rates. I suppose theres always a percentage of property buyers who over stretch but I dont think it will result in a disastrous situation, they will either have to sell or rent a room, or get a second job, of cut back on holidays or something.

It does make you wonder when it will slowdown to a normal inflation type increase of say 2-3%. I dont know where people get the money to buy some of the properties on sales these days, 750k for a 3 bed semi in South Dublin?!

 

[casiopea]

My specific case is based on Dublin prices. True it is speculative but its as specualtive as saying "I think the population will continue to grow" or "I think the prices of goods will continue to increase".

Hmmm, I disagree. There is no way we can tell if we'll get good return on investment in say 10 years in Dublin on these properties. Its not the same as saying "I think the population will continue to grow". As you said, Dublin is quite a unique situation right now and some properties right now are really selling at extortionate prices (ie http://www.msnbc.msn.com/id/9398215/.
We might just have to agree to disagree.

You are waiting for a decrease im Interest Rates, I thought they were going to go up?

OK, I responded a bit too quickly in my last post. Im not just saying Id only wait for interest rates drop. I agree with you there, I believe they're going up, I think theyve just gone up in switzerland.

That would probably slow the rate of increase in house prices but I really cant see it decreasing the price of a house to 2000 or 2001 levels (which I assume you are hoping for something like this?). If you are looking at Dublin then thats just a unique situation, demand is way too strong there to reduce prices. Only hope for a sligjht slow down if interest rates increase.

Nope. Im not hoping for that type of decrease. You mentioned earlier the model of spending 450 euro a month on rent. After 5 years thats 27k. I agree with you. That is wasted money compared to spending that 27k on the principle of a mortgage. The point is if you pay back a mortgage over 5 years you are also paying interest. Indeed the first couple of years sometimes only interest. At the end of 5 years you have not paid off 27k. Now thats ok too, because you still have your investment. However in the scenario where rent is lower than the interest rates. So rent
is 450 but the interest would be 475 on the mortgage then renting is not a waste. In this scenario, I think Im better off saving (at minimum the difference in my example 25 euro but at maximum as much as you can) to increase my deposit, therefore decreasing my loan and interest rate charges bringing that 475 down under the rental amount. This is one reason why so many people on the continent rent.

By the way, just to step back here. I was responding specifically to Bachus's earlier question (""Rent is wasted money " . Sentence use and abuse for the last 100 years. The last time somebody mentioned that to me, i asked "why?"... Pure silence was the answer... Most people say it but can not explain why..So, tell me why do you think it is a waste?").

I was trying to highlight that sometimes rent is not a waste of money and sometimes it is. Im currently renting but I also own a property.