Buying Investment Property with a Partner or Friend NZ

Benefits of Co-Investing

There are genuine advantages to buying property with someone else:

• Combined deposit: Two people can often meet deposit requirements that one could not.
• Increased borrowing capacity: Two incomes mean you can borrow more.
• Shared costs: Purchase expenses, maintenance, and unexpected costs are split.
• Shared workload: Property management tasks can be divided.
• Faster market entry: You can buy sooner than waiting to save alone.
• Reduced risk: Financial burden is shared if things go wrong.

Understanding Ownership Structures

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

Joint Tenants

With joint tenancy, all owners hold the property equally and have a right of survivorship. This means:

• If one owner dies, their share automatically passes to the surviving owner(s)
• Ownership shares are always equal (50/50 for two people)
• All owners must agree to sell or mortgage the property
• Common between married couples or de facto partners

Tenants in Common

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

• Shares can be unequal (e.g., 60/40 or 70/30)
• Each owner can leave their share to whoever they choose in their will
• Shares can be sold independently (though other owners may have first right of refusal)
• More flexible for investment partnerships where contributions differ

The Co-Ownership Agreement

A co-ownership agreement (also called a property sharing agreement) is essential when buying with someone else. This legal document should cover:

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:

This is why trust and careful partner selection are so important. You need to be confident your co-investor will meet their obligations.

Choosing the Right Co-Investor

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

• Financial stability: Do they have stable income and good money habits?
• Aligned goals: Do you agree on holding period, exit strategy, and risk tolerance?
• Communication style: Can you discuss money and problems openly?
• Track record: Have they honoured financial commitments in the past?
• Relationship strength: Is your relationship strong enough to survive disagreements?

Common Problems and How to Avoid Them

Problem: Different Investment Timeframes

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

Problem: One Party Wants to Sell, the Other Does Not

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

Problem: Disagreement Over Property Decisions

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

Problem: Unequal Contributions Over Time

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

Getting Professional Help

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

• Lawyer: To draft your co-ownership agreement and explain the legal implications
• Accountant: To advise on ownership structure and tax implications
• Mortgage broker: To explain how joint borrowing affects each party's borrowing capacity

The cost of good advice upfront is nothing compared to the cost of disputes later.

Making It Work

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

With the right preparation, co-investing can be a powerful way to build property wealth together.