With property prices (and interest rates) on the rise, co-owning a home could be the perfect solution.

As an Urban article phrased it, "It’s a natural extension for some, to go from renting a property with their best friend or siblings to owning one together."

Certainly, co-owning a property beats struggling to pay rent or a home loan all on your own - along with the financial and other stressors involved in both renting and buying in 2023.

But as with all things real estate, there's more to property co-ownership than meets the eye - particularly so when it comes to the legalities of such a plan.

Let's take a look.

Co-ownership: the basics

Co-ownership is sometimes called fractional property investment, property crowdfunding, and property co-vesting.

Regardless of its title however, the song remains the same: co-owners own part of the same property with the general idea being that the two (or more) people involved will utilise the property as either owner-occupiers or investors.

These people share the financial, legal, and other responsibilities of the property - including the initial deposit - as well as its benefits such as capital growth and yields. 

Most often, co-owners are couples, family members, friends, or work colleagues.

However, several websites now also enable complete strangers to become co-owners (read on for more information on this).

Co-ownership: the good points

Co-ownership allows you to enter the property market sooner - making this the biggest reason to enter such a relationship.

For first-home buyers and singles in particular, this is no mean feat considering recent property price rises along with those of interest rates.

Other pros to co-ownership include:

• no need to save for a full deposit
• shared initial costs including stamp duty and legal fees
• reduced, ongoing maintenance and other costs
• shared, general home ownership stressors 
  
• more mortgage and property options 

Co-ownership: the bad points

Unfortunately, there can be plenty of cons to entering a co-owner relationship.

But the good news is, many of these can be avoided by thinking about -and agreeing to - crucial property plans before signing the dotted line on this relationship.

The biggest con to consider is that more often than not, you'll be mixing business with pleasure.

Ask anyone who has worked in a family company or employed friends and they'll tell you just how quickly such a mix can go wrong - thereby ruining not just your finances but also a great friendship.

As Open Agent explains: Don't assume that you will always agree or have the same investment objectives - even if they are your flesh and blood or a very close friend. They could get married, lose their job or even die - all scenarios that could put your investment at risk.

Plus, life, in general, can throw us many completely unexpected difficult moments, again leaving our finances - and ourselves - in complete disarray.

Think: illness, a death in the family, a lost job, a new baby, or an enforced move to another state or country.

Of course, such bad times may never happen but as the saying goes: you need to plan for the worst while hoping for the best."

And it's also crucial to remember that regardless of co-owner relationship dramas and the dramas life throws at you, your lender will still expect regular repayments.

So, negative points about co-ownership can include:

• liability for a co-owner's financial issues (ie you may well have to shoulder their debts as well as your own) 
• this liability could affect your future borrowing power
• disagreement about property maintenance issues
• disagreement on whether to sell the home

Co-ownership: the legalities

The best way to avoid such co-ownership cons is by ensuring all legal agreements are in place and water-tight well beforehand.

Indeed, as Open Agent puts it: "Without a (legally binding) co-ownership agreement you could become involved in costly litigation to work out a solution".

Basically, you need legal recourse if your co-ownership situation gets ugly - and even if the disagreements are mild, a legal agreement is an excellent place for both you and your co-owner/s to base your plans on.

Sunshine Coast legal firm, Argon Law, explains that Australian law recognises two types of co-ownership: joint tenancy and tenancy in common. 

Joint tenancy means the co-owners own the property equally.

This means that if one owner dies, their share passes directly to the surviving owner/s and does not form part of their estate distributed under their will.

Or, as LJ Hooker explains, this form of co-ownership has survivorship rights which means that if one tenant passes away, the surviving tenant assumes ownership of the entire property.

LJ Hooker adds that couples traditionally utilise this type of co-owner agreement as it enables them to own an entire interest in the property as a couple, rather than as individuals.

In comparison, a Tenancy in Common agreement sees the co-owners having specified shares of the property - which can be equal or not.

If one of the co-owners dies, their share of the property forms part of their estate to be distributed in accordance with their will.

Or, as LJ Hooker says it, this type of agreement offers a more flexible form of property co-ownership, with co-owners able to transfer their interests independently of the other owners.

Argon Law adds that either way, co-owners should consider the following before signing off on a legal agreement:

• Who will occupy the property?
• How will the payment of outgoings be met?
• What happens if one owner wants to sell their share before another is ready?
• How will disputes between co-owners about such matters be resolved?

One Agent also adds that a co-ownership legal agreement should feature the following, at least:

• rights and obligations of each person with a share in the property 
• how mortgage repayments are made, and by whom
• who is responsible for maintenance

Co-ownership: owning with website stranger

If you fear the fall of a friend or family relationship via a co-owner one, there are other options available to you with several proptech websites emerging to help such people.

Our very own Listing Loop is an excellent place to find such co-opportunities with several recently being listed on our off-market property platform.

This includes a new, four-bedroom, five-storey abode on the Gold Coast, willing and ready to go to the first co-ownership bidder.

Urban also mentions BrickX and DomaCom and another site - Mortgage Mates - which unashamedly describes itself as a "relationship website for home ownership".

If finding a property and a partner together isn't on your bucket list, you could try BrickX, which sees co-owners literally purchase a certain number of bricks at a property.

You'll then earn rental income in proportion to how many bricks you own - and this includes capital returns when you sell your bricks (in line with property price changes). 

DomaCom meanwhile is similar but gives potential co-owners the chance to invest on a much larger property scale and across a wide range of market segments.

We're here to help

If you're interested in co-ownership, Listing Loop's end-to-end property transaction platform offers several opportunities, with our website being a marketplace for off-market and pre-market properties for sale.

In this way, we give you all the services you need altogether, under one roof, with the focus always being on how best to remove friction from buying, financing, and selling.

Plus, if you need extra support, our Buyer Assist or Seller Assist services give you the opportunity to work with one of our team members, who not only have access to information unavailable to the public but also the requisite experience and expertise to remove a large chunk of your stress.

So, sign up to become a member today for FREE and take advantage of our exclusive member property services.