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Buying an Investment Property with Family or Friends

By Donna Jones

[Originally published June 2019. Updated August 2021]

New Zealand home ownership rates are the lowest they’ve been in 70 years, with almost one in three households now renting. Combine this with increasing house prices and it’s easy to see why more and more kiwis are considering purchasing an investment property with family members or friends.

If you’re entertaining this move, it’s important to explore the pros and cons of this arrangement and discuss strategies to make the relationship and investment a fruitful and harmonious one.

What are the benefits of purchasing an investment property with family or friends?

  1. The main benefit of purchasing an investment property with other people is that it lowers the financial burden for each person.
  1. When you’re a joint owner of a property, you share the cost of the deposit, mortgage payments, transaction costs and ongoing maintenance expenses. Co-ownership can help you get on the property ladder much sooner than you may be able to on your own. For some it might be their only option.
  1. Assuming you have a healthy relationship with the other people you’re buying the property with, then you’ll be able to troubleshoot any issues together.
  1. If you choose to manage the property yourselves, you’ll have a group of people available to respond to tenant concerns and handle property maintenance and repair needs. When issues arise, you’ll be able to find the best solution, together.
  1. Alternatively, if you choose to go with a reputable Christchurch property management service provider, you’ll be able to absorb this wise investment between you and reap the benefits of a more stress-free landlord experience.

What are the disadvantages of purchasing an investment property with family or friends?

  1. Homeownership is a complicated process and investment properties that are rented out to tenants bring an additional level of overhead. The biggest risk of investing in property with other people is that one person in the group could default on their mortgage payment.

If a payment is late, everyone in the group is liable for any related penalties.

  1. Another problem that can occur is when one person wants to sell before the others are ready.
  1. Lastly, there’s always the risk that the joint ownership of a rental property could sour the relationship between you and the other owners and result in bad feelings and hostility among family or friends.

How to avoid the pitfalls of co-ownership of a rental property

We’ve worked with many groups of people who have purchased investment properties collectively. We’ve seen arrangements that are hugely beneficial to everyone involved, and ones that have ended in heartbreak.

If you’re considering investing with family members or friends, we encourage you to take the following steps before signing any agreements:

  1. Choose the correct legal structure for your arrangement. There are three options commonly used by groups of people co-purchasing an investment property: General Partnership, Company Partnership and Limited Partnership.

Understanding which one is best for your group is critical — we encourage you to seek legal advice to ensure that you set yourselves up right, from the beginning.

  1. Try to identify any sources of problems or conflict, upfront. Discuss how you will handle difficult situations, such as one party being unable to make a payment. By talking through these scenarios and coming up with constructive solutions, you’ll be better prepared if they do arise.

You’ll also gain valuable insight into how the other members deal with conflict resolution.

  1. Document everything. Be sure to record all the details of your arrangement, including the ways in which you’ll resolve issues.

You’ll need to document the amounts that each party is paying towards the deposit and how you’ll handle maintenance or repair expenses and responsibilities.

  1. Be a diligent bookkeeper. Once the property has been purchased, be sure to keep careful records of incurred expenses so you can ensure that they are divided equally among all parties.

This will prevent any one member of the group from feeling like they are shouldering more of the financial burden than the others.

Ready to invest in a Christchurch rental property as a group?

If you’re ready to move forward with the purchase of an investment property with family or friends, we encourage you to contact us today. Our team understands the ins and outs of joint property ownership and can help you find a property that meets everyone’s needs.

We can also provide you with the referrals necessary to help you get set up properly and ensure your venture is a success.


Renting, Buying, Selling Contract by Mark Moz, CC BY 2.0

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