Toronto real estate can be an excellent investment in your future. That said, it’s not the easiest market to get into due to rising housing prices and closing costs.

Some people are pulling out all of the stops and getting creative to buy a house, whatever it takes. One of the ways is to consider joining with a friend or even a group of other people you know and trust. The right partnership can make homeownership more accessible for everyone involved.

Over the years, we have worked with several non-related buyers who purchase houses together in Toronto. Some of these situations have led to fantastic results where all owners were thrilled with their new home and living arrangements. We have also seen our share of disastrous scenarios. The good news is that this experience has given us insight as to what to watch out for before taking this plunge with a platonic partner.

Searching for your perfect home in Toronto’s West End? You may just find it while browsing our latest listings.

Ask the Hard Questions

Someone could be your absolute best friend in the world, who has stood by you through thick and thin for many years. It’s hard to believe, but that close relationship doesn’t automatically make it a good idea to buy a house together. Co-ownership can test your friendship to a level that you must be prepared for.

First of all, your finances are about to be irreversibly intertwined. Is that a commitment you really want to make? Once you take possession, there is no guidebook on how to split up expenses or share the responsibilities of owning a house. For the partnership to be successful, you’ll need to sit down and have an honest and detailed conversation. This means asking tons of questions to ensure you are on the same page.

• How much of the down payment will each of you cover?
• What is the maximum budget for each new owner?
• Do you plan to live together, or will one owner live there while the other simply maintains an equity share?
• Who will mow the lawn and handle snow removal?
• Are there enough parking spots for everyone?
• Do you have similar lifestyle and location preferences? If you are an early riser and your friend is a night owl, you could be setting yourself up for conflict.

Speaking of conflict, do you have a plan for how to peacefully resolve disagreements before they turn into disasters? What happens if one owner decides to bring in a roommate or a live-in partner?

When buying a house with someone else, it’s important to consider every single scenario. Even if they never happen, this exercise can still help you decide if you and your friend are compatible as homeowners.

Whether buying a house with a partner, a friend, or another couple, title insurance is another major consideration. Learn more in Is Title Insurance Mandatory in Ontario?

Cover Your Bases Legally

When a married couple buys a house, it’s usually as Joint Tenants, which gives each partner an equal share and equal rights to occupy and possess the property. When buying with a platonic friend, you may or may not want to set up the title this way.

Before you sign on the dotted line, a good real estate lawyer is essential. You might trust your friend with your life, but it still helps to have all of the legalities ironed out in an official, written agreement. Think of it as a homeowner’s equivalent of a prenup. You are protecting yourself and those you care about.

What else should you consider before buying a house? The posts below will help you make informed decisions at every step:

• Home Buyers Beware: What You Need to Know About Mortgage Appraisals
• How Much Is Land Transfer Tax in Toronto?
• What Does Closing Date Mean in Real Estate?

Have an Exit Strategy

It is critical to have an exit strategy when buying a house with a friend, even if you never plan to use it. Life is unpredictable. Circumstances can change, and one of you might want to leave at some point.

Extricating yourself from the house isn’t just an emotional experience. You have a significant amount of money tied up in the property, and you will need to find a way to separate your finances in the least disruptive way possible.

For example: What if two couples buy a house together and one of those couples breaks up and needs to move? You may need to agree to sell the house before you intended. Speaking of intentions, is everyone on the same page about how long you plan to hold the property in the first place?

Is this a 5-year plan for you but a 20-year plan for your friend? In this case, co-ownership is probably not going to work, no matter how badly you might want it to.

Know What You’re Bringing to the Table

People rarely contribute the exact same amount of money initially when buying a house. Between married couples, this disparity doesn’t matter as household finances are shared. With a friend, it’s different, and fairly allocating any equity growth in a house can quickly become complex.

Before purchasing, sit down with your friend and an unbiased third party to create a long-term agreement. While you’re at it, consider the expenses associated with maintaining or upgrading the home.

If one couple invests in a large renovation, does their equity share grow proportionately? This is one more aspect everyone needs to agree to in advance.

Looking for more tips to get the best value from your home purchase? The posts below can help:

• What to Look for in a Buyer Agent
• Our Guide to the Home Buying Process
• How to Check Market Value of a House in Toronto

Full Disclosure and Transparency

As with any situation, joint home ownership depends on open communication and total transparency with everyone involved. Expert guidance throughout each step will also facilitate a successful experience.

When all of the pieces come together, buying a house with someone else and combining finances can create greater affordability and a high quality of life that would otherwise be unattainable. It’s a fantastic opportunity that is at least worth talking about.

Do you want maximum support while searching for your next home? Our West Toronto Realtors® are here for you every step of the way. Contact us today at 416-788-1823 or email kim@kimkehoe.com to learn more.