Should you buy property with a friend or family member?

September 19, 2023 Catherine Salat

Katoomba property prices have really shot up, not just over the past year but over the past decade.

In early December 2021, Katoomba vendors were asking an average of $877,000 when listing their property for sale, according to SQM Research. Back in December 2020, the average asking price was $755,000. And in December 2011, it was only $433,000.

That means asking prices have increased 16% in one year and 102% in one decade – which is great news if you’re a seller, but not so great if you’re a first home buyer.

What can you do if you’re struggling to enter the Katoomba property market?

The pros of buying property with someone else

One option might be to split the cost with somebody else, either as ‘tenants in common’ or ‘joint tenants’.

A recent Commonwealth Bank
survey found 25% of Australians had considered buying a property in tandem with a parent, sibling or friend.

The obvious benefit to partnering with someone else is you can enter the market sooner.

Another benefit is you increase your borrowing power, which means you might be able to buy a better home.

Also, if circumstances allow, you can buy a property with two separate residences,
as Blue Mountains friends Emily and Kate did. While you might be living with someone else, you also have your own space.

The cons of buying property with someone else

That said, buying a property with a friend or family member involves some potential negatives as well.

The moment you add a large sum of money into the relationship, you go from being just friends or family members to being, effectively, business partners as well. That’s a lot of pressure, and means your business relationship could put a strain on your personal relationship.

It could also happen in reverse. Your personal relationship might break down for reasons that have nothing to do with money or the property – which might then threaten your business relationship.

The loan can be split in two, which clearly establishes each party’s financial responsibility and repayment position. However, both parties are liable for the full debt, so if the other person failed to meet their mortgage commitments, the bank could ask you to make up the difference. (Each party can see the other person’s loan position via their online banking, so they know if the other person is keeping up with their repayments.)

Another potential problem is if one party wanted to sell and the other didn’t.

Under a ‘joint tenants’ arrangement, both parties need to agree to a sale. If you wanted to exit and your partner didn’t, you’d either be trapped or forced to take legal action.

There’s more flexibility to sell under a ‘tenants in common’ arrangement, but there are still obstacles to overcome. If a new person bought in to the property, that would force the original owner to refinance. A refinance would be triggered even if the new buyer paid cash; in that scenario, the new buyer would need to act as a security guarantor. Either way, it would be advisable for the original owner to consult a lawyer to get advice on the new arrangement.

A final point to consider is what would happen if one of the owners had a breakdown in their marriage or de facto relationship, as that might affect the ownership structure of the property.

Get professional advice

Like anything in life, buying a property with someone else comes with pros and cons.

In the short term, it might allow you to enter the market sooner. But in the long term, problems might arise.

It’s a tricky option, but potentially worth considering in certain circumstances.

Before proceeding down this path, it’s important to get legal and financial advice.

Just Imagine Finance has helped other people buy property with friends and family members, and can help you too. To discuss your options, contact Catherine at or 0414 673 359.