Co-ownership

As house, land and apartment prices soar to record highs across Australia, the barrier to entry on the property market has become an even&nbsp;more distant dream for some.

The great Australian dream of owning seems farther than ever and this holds especially true on the income of a single person, with more and more Aussies holding out on buying their first home, or any home until they have a partner.

Some however have turned to co-ownership.

It&rsquo;s a natural extension for some, to go from renting a property with their best friend or siblings, to owning one together.&nbsp;

In NSW in particular, there have been a growing number of property co-owners who are not married or in a de-facto relationship with their co-owner.

Not only is this happening among&nbsp;friends and family, property co-ownership is even occurring among strangers, with new proptech firms, such as BrickX and DomaCom,&nbsp;focusing on fractional ownership.

BrickX focuses on individual houses and units, where investors can buy Bricks that make up a percentage of the value of the property.

A Brick&rsquo;s value will change depending on the most recent evaluation of the property&rsquo;s value as well as what people are willing to pay, similar to the stock market, it&rsquo;s speculative.

DomaCom operates in a similar fashion, but with investments on a larger scale across many segments of the market, where purchasers are locked in for a certain period of time.

The newest co-ownership proptech is Mortgage Mates, described as something similar to a dating website for home ownership.

Calling themselves, &ldquo;the Bumble of home ownership,&rdquo; they match clients with other individuals (Mates) who have the same housing preferences, to own and live in a home together.

A more established example is Co-Own.com.au where multiple parties have a purely business relationship with just one party/person as the owner occupier.

There are different pro&rsquo;s and con&rsquo;s to shared ownership of a property amongst friends, family and strangers.

The main positives of co-ownership are mainly the normal benefits of owning a property, quicker access to the housing market, safer and more flexible investment options and not &ldquo;throwing your money away&rdquo; on rent.

Negatives abound, changes can arrive in your relationship with the friends you are co-owning with, they could find a partner, have a child, fall ill, default on the loan or even have a falling out with you.

The best way to mitigate some negatives is a contract and for services like Co-Own.com.au, they even recommend a property manager, but these can only do so much.

It’s a natural extension for some, to go from renting a property with their best friend or siblings, to owning one together

jordan_55689

What is home co-ownership and can it put you on the fast track to owning your home?

<html><body>
GUEST OBSERVER
Digital platforms are offering people who couldn’t afford a house on their own, the opportunity to divvy up the costs with others. But co-ownership of real estate can be a risky and potentially costly business.
In an environment of high residential prices where families are becoming a smaller proportion of households, and permanent relationships are giving way to transient and more distant connections, digital platforms for co-ownership are filling an emerging need.
Co-ownership permits a whole range of sharing options. For example, it allows an occupant to be a part owner in their own home even if they cannot afford to buy the whole thing. It also permits an investor to take a smaller position as a promise of a better relationship with the tenant.
However, buying or selling a property involves legal, financial, statutory and agency costs that mean that even moving across the road can cost about half a year’s income. This means that you need to be sure of what you are doing and reasonably confident that you will not be changing your mind about your investment too quickly.
Digital platforms like Kohab are using the legal relationship known as “tenancy in common” to facilitate co-ownership. It permits the separate parties to have a defined share of the house and to transfer their interests independently.
But this still presents considerable practical risks. Someone wanting to sell their share of a house is likely to find a limited market of other people willing to take over the part ownership, and they are likely to have a weaker negotiating position in selling.
The remaining co-owners of a house also have no control over who the incoming partner will be. This may limit their preferences in relation to how the property should be managed. It can make remaining with the investment uncomfortable and lead to even more turnover of ownership and the prospects of sale at a discount.
How co-ownership has changed over the years
Shared real estate ownership has been evolving for some time. The strata title system was introduced over 50 years ago when it became necessary for single buildings to be owned by multiple people.
Company title co-ownership was unpopular because the co-owners did not always agree on how to manage their property. It was also unpopular because sale of part-interests was difficult and often settled at a discount to true value.
However, it overcame the problems of management and resale that dogged the earlier company title. This approach used company shares to split ownership of a property between several investors.
Australia was later an innovator in the development of property trusts that applied the company model, but with someone to manage the the shared ownership of complex properties.
These property trusts have blossomed as an investment and are now commonly known by their US name - real estate investment trusts. These trusts usually focus on commercial buildings where they provide a vehicle for small investors to access property investment in major real estate assets.
Where digital platforms come in
Online applications such as DomaCom or BrickX have brought the trust model online and applied it to smaller properties that are not usually the target of these traditional trusts. BrickX for example divides its selected investment properties into 10,000 “bricks” and allows investors to buy bricks.
This permits up to 10,000 owners for an individual property. It also allows small investors to spread their funds across multiple properties to control their risks. DomaCom follows a different strategy to achieve the same goal of allowing a large number of investors to be involved in individual managed investment properties.
Then there’s new apps like Kohab. Its point of difference is that it operates on a smaller and perhaps more intimate scale.
It does not rely on a crowdfunding approach, but uses its online platform to connect owner/occupiers and investors for the purpose of co-ownership. It does not produce real estate investment trusts, but does facilitate the co-ownership of individual dwellings by more than one owner.
<img src="https://counter.theconversation.com/content/93058/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">In capital cities it is getting harder for individuals and families to afford properties. Co-ownership with others, either as shared occupants, or distant investors, is one way to cross the rent/buy gap. But it’s not without risk.
Garrick Small, Associate Professor, CQUniversity Australia
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/courting-co-owners-to-buy-a-house-online-may-be-riskier-than-it-looks-93058" target="_blank">original article</a>.
</body></html>

Co-ownership

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Co-ownership

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News