Buying Investment Property with a Partner or Friend NZ

Benefits of Co-Investing

There are genuine advantages to buying property with someone else:

• Combined funds: Contributions may help meet purchase costs, subject to lender assessment and evidence requirements.
• Borrowing assessment: A lender considers the full application; adding income does not guarantee greater borrowing capacity or approval.
• Shared costs: The parties can agree how to fund purchase and ownership costs, but the agreement does not necessarily limit obligations to third parties.
• Shared workload: Tasks can be allocated, with authority and accountability recorded in writing.
• Timing: Co-ownership may change when a purchase is feasible, but it does not guarantee earlier or better market entry.
• Linked risk: A co-owner’s default, insolvency, death, relationship change or need to sell can affect every other owner.

Understanding Ownership Structures

In New Zealand, there are two main ways to hold property with someone else:

Joint Tenants

With joint tenancy, owners have equal rights in the property but do not hold separate defined shares. The interest of an owner who dies generally passes to the surviving joint tenant or tenants by survivorship.

• The owners do not hold separately defined percentage shares.
• Survivorship generally transfers a deceased owner’s interest to the surviving joint tenant or tenants.
• Title, finance and any agreement must be considered together before a sale, transfer or new mortgage.
• Relationship-property and estate consequences depend on the owners’ circumstances.

Tenants in Common

With tenancy in common, each owner has a distinct share that can be different sizes:

• Each owner holds a defined share, which may be equal or unequal.
• A deceased owner’s share generally forms part of their estate rather than passing by survivorship.
• A proposed transfer, mortgage or first-refusal process must be checked against the title, agreement, lender requirements and law.
• Defined shares do not by themselves resolve contributions, tax, liability, decision-making or exit disputes.

The Co-Ownership Agreement

A written property-sharing or co-ownership agreement can document how the arrangement is intended to operate. It should be prepared for the actual title, finance and parties and coordinated with any relationship-property agreement, wills and tax advice.

Ownership and Contributions

• Ownership percentages and how they were determined
• Initial deposit contributions from each party
• How ongoing mortgage payments are split
• Responsibility for rates, insurance, and maintenance costs

Decision Making

• How decisions about the property will be made
• What happens if owners disagree
• Authority to make emergency repairs
• Process for approving tenants or property managers

Exit Scenarios

• What happens if one party wants to sell
• Right of first refusal for remaining owners
• How the property will be valued for buyouts
• Minimum holding period before sale can be forced
• Process if one party defaults on their share of payments

Life Events

• What happens if an owner dies
• What happens if an owner gets divorced or separates
• What happens if an owner goes bankrupt
• What happens if an owner wants to bring in a new partner

Understanding Joint and Several Liability

When you take out a mortgage with someone else, you are usually jointly and severally liable. This is critically important to understand:

Joint borrowing commonly exposes each borrower to more than an agreed private share, but the precise liability comes from the signed loan, guarantee and security documents. Obtain the lender’s proposed terms in writing and have them independently explained.

Consider the consequences of missed payments, insolvency, death, separation and a forced or delayed sale. Trust does not replace written terms, lender confirmation or independent legal advice.

Not everyone makes a good property partner. Consider these factors:

Before committing, compare each person’s financial position, objectives and ability to meet the documented obligations under adverse scenarios.

Common Problems and How to Avoid Them

Planning for Problems

Solution: Agree on a minimum holding period and review dates in your co-ownership agreement.

Possible agreement term: Record intended review dates and any holding-period or exit process, after legal advice on whether and how it can operate.

Solution: Include clear exit provisions, buyout procedures, and valuation methods in your agreement.

Possible agreement term: Define notice, valuation, buyout and sale processes, including what happens if finance or a buyout cannot be obtained.

Solution: Define decision-making authority upfront. Consider appointing one person as the primary decision-maker for day-to-day matters.

Possible agreement term: Allocate day-to-day authority and reserve material decisions for the owners, with a dispute-resolution process.

Solution: Track all contributions and agree on how additional investments affect ownership shares.

Possible agreement term: Keep contribution records and specify whether later payments create a debt, reimbursement right or proposed ownership change. Ownership transfers can have legal, lender and tax consequences.

Before buying property with someone else, invest in professional advice:

Before buying, obtain advice scoped to the proposed parties, property, title and finance:

• Property lawyer: title form, sale and purchase agreement, co-ownership terms, lender documents, wills and exit processes.
• Relationship-property lawyer where relevant: how marriage, civil union or a de facto relationship and any contracting-out agreement may affect ownership.
• Tax adviser: rental-income filing, partnership treatment, ownership changes and any sale or transfer consequences.
• Lender or appropriately regulated mortgage adviser: who must borrow or guarantee, security, affordability assessment and release requirements.

Fees and scope vary. Obtain written estimates and understand what each adviser is and is not covering; professional input cannot guarantee that disputes or losses will be avoided.

Successful property partnerships are built on:

• Clear written agreements covering all scenarios
• Open and honest communication about money
• Regular check-ins to discuss the investment
• Separate personal finances from the investment
• Treating it as a business arrangement, even with friends or family

Co-investing can spread contributions and tasks, but it also creates linked legal and financial risks. It does not guarantee market access, lower risk or wealth, and structure-specific decisions require professional review.