As the first rung of the property ladder gets harder to reach, would-be buyers are having to find new ways of gaining access to the marketplace. In recent years we have heard of people buying with family or friends, but that isn’t always possible.
For one Londoner who was finding it difficult to get on to the property ladder, an inventive strategy for becoming a property owner has developed into a business.
Theo Michaels, 29, founded Co-BuyWithMe.co.uk out of his need to find someone with whom to share the cost of buying a property. The website guides prospective co-buyers through the process, helping the buyers be clear about their own objectives and matching them with others with complementary goals.
Michaels’ successful experience in the property market has prompted him to share his wisdom with those who are unsure of the best way to proceed. He offers these answers to frequently asked questions about co-buying.
What is co-buying?
It is when a group of two or more people join forces to buy a property together. Some co-buyers do it because they cannot afford to buy their first home alone, others want to co-buy with an investor to get into the buy-to-let market, and other co-buyers want the pleasures of a holiday home without the massive cost!
So why did you co-buy?
I was one of the thousands of first-time buyers who simply could not afford to get on the property ladder on my own. After looking into a mortgage and seeing how high London property prices were, I knew the only option I had was to co-buy which meant we had a bigger deposit, larger mortgage and split all the costs.
Did you know your co-buyers?
Not originally. I put the word out with friends, family, colleagues and eventually got introduced to my co-buying buddies through mutual friends. We all met up a few times to get to know each other (i.e. went drinking!) and then spent some sober time working out what we all wanted from our co-buying experience and what terms we would agree to.
What were your aims as a group?
We all wanted to co-buy as a stepping stone to get on the property ladder so we agreed on the following (although different situations call for different terms):
- to stay in the property for two years minimum; if anyone wanted out before the two-year period they had to find another
- co-buyer or carry on paying their share until the two-year period is up
- if after two years anyone wanted their money out, we would sell the property and not restrict anyone, unless they could
- find someone to buy them out.
- all costs to be split equally
- be as flexible as possible with each other
This all sounds good but isn't it risky buying with strangers?
It's only risky if you don't protect yourself. There are several things you can do to protect yourself and your investment, including:
draw up a Declaration of Trust, a legal document which states the terms and says we are all legally responsible for our share of the mortgage
get payment protection on the mortgage in case someone was out of work; at least that would ensure their share of the mortgage was paid.
each draw up a Will to protect our asset should anything terrible happen to us
Do you still live with them now?
Actually, yes! We have just come up to our two-year period and are going to remortgage our co-bought property to take some money out and use that as a deposit to buy on our own! Co-buying was a perfect stepping stone and luckily we are able to keep our current house and rent it out - not to mention the holiday home I and some others co-bought.
We may have started off as strangers but we're definitely friends now!
What holiday home?
After the success of my first co-buying experience, a friend and I wanted to buy a holiday home in a ski resort, but found that it would stretch us financially. We realised we needed other co-buyers to make it viable. Eventually there were six of us that co-bought it (two of them I've never even met!) and it has worked out great - we'll be off snowboarding by March 07!
What if I don't know anyone to co-buy with - where can I find other co-buyers?
I thought you'd never ask! After my experience I created a free website for co-buyers to find & contact other co-buyers, plus we have some great co-buying information including a co-buying guide and case-studies from first-time and overseas co-buyers, as well as investor co-buyers who want to get involved in buy-to-let market.
Visit Co-BuyWithMe.co.uk