Buying an investment property with a friend, family member or partner can be a great way to step onto the property ladder. By pooling your combined income, you can make your first residential purchase and start earning a passive income.

While investing together can be a great idea, it’s important to get the ownership structure right. The way you choose to invest may depend on varying incomes, negative gearing opportunities or even just personal choice.

Smiling couple hold an empty frame with a house in background

Here is a look at some of the common options that investing partners may consider for their property purchase.

Joint Tenancy

When you invest in a property as joint tenants, the individuals own the entire property together. In these arrangements, rental income and expenses such as maintenance costs are divided evenly.

If you’re pursuing a negative gearing strategy, a joint tenancy ownership will work best when each property owner has a similar income. Otherwise, the potential tax savings will be minimised and the strategy will not be as effective.

This type of ownership is common for married couples where ownership automatically reverts to the other party in the event of a death

Co-Ownership or Tenants in Common

Co-ownership is a more flexible ownership structure, which allows each investor to own different amounts of a property. Instead of a 50/50 split, co-owners can decide on a different ratio such as 60/40 or 70/30.

In these situations, one income earner would be responsible for the majority of the losses and expenses involved in an investment property, but they would also benefit from the majority of the income generated. Co-ownership also gives you greater flexibility to sell your share of the property should your circumstances change.

In the event of death of the one party, ownership reverts to the beneficiaries in the will

Co-Ownership Agreements and Avoiding Disputes

A co-ownership agreement is a legal document that protects co-borrowers when disputes arise. Disagreements could involve one party wanting to sell their share, refinancing the property, or even disputes over how to distribute the costs and income from the investment.

While co-ownership investments often begin amicably, the potential for disagreements or financial difficulties presents unique risks for investors. Co-ownership agreements can prevent expensive and drawn out litigation and protection all parties involved.

Investing Under One Party’s Name

Especially recommended for couples, parties can choose to share an investment property but only register it in one name. This allows the property to be offset under one person’s income, while all earnings and expenses will also be received by one person. Of course, this arrangement requires inherent trust as there is little to no protection for the informal owner of the property.

Expert Advice and Property Management for Residential Investment in Perth

Offering a range of services for residential property owners, including comprehensive property management, Gow Property can guide you through your investment options.

For a discussion with our experts, send us a message online or call 08 6389 7777 for more information.