Many prospective co-purchasers ask themselves “Can this really work?”
Of course, it can!
With good planning, your co-ownership purchase can be a profound and rewarding experience. The following are 3 entries are studies from groups who co-purchased their homes. While not all of these groups remain together, their stories demonstrate the importance of preparation and following the 5 Steps.
Two Generations
Step 1: The Purchasing Group
A middle-aged couple wanted to help their son and new wife purchase their first property. For affordability, the family decided to co-purchase a 2-unit home.
Step 2: The Financing
They worked out a budget of $1 million for the purchase price. The parents contributed $300K for the down payment. Equity was split 38% for the younger couple, and 62% for the parents.
Step 3: The Group Agreement
Home maintenance costs were shared, but little else. No house rules or future scenarios were included in their co-living agreement.
Step 4: The Legal Agreement
The Legal Agreement was made between two couples. Both couples had the right of first refusal if one party decided to leave, but no future scenario contingencies were included.
Step 5: The Property
All adults worked in downtown Toronto, so TTC access mattered. Units needed to be completely separate. A 4-story duplex was purchased for $990K.
While this family was able to successfully co-purchase a home, after 4 years, the younger couple split up. The parents had the right of first refusal to buy their son’s share but they didn’t want to be landlords; their interest in the home had been centered around sharing it with their son and daughter-in-law. Though the home was sold for over 130% of what they paid for it, this group did not articulate their desires for potential futures in their Group Agreement.
Instead, they relied heavily on their existing relationships to mediate any issues that arose. In retrospect, this family wished that they had constructed the agreement as four individuals, rather than two couples. They didn’t consider divorce. The assignment of individual equity would have provided a mechanism for the son to buy out his wife’s share, allowing him the possibility of remaining in the home.
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