Buying a Private Condo with Friends or Spouse (3 Tips)
When buying a property with another person, be it a spouse or a friend, the first thing you need to decide is to determine how the property is split among the co-owners (e.g. Joint tenancy or Tenancy-in-common). Below are 3 tips for your consideration
Table of Content
● Tip 1: Objectives and Exit Plan
● Tip 2: What is Joint Tenancy?
● Tip 3: When to Choose Tenancy-In-Common?
📌Tip 1: Objectives and Exit Plan
- When you are buying with friends or siblings, the most common reason is usually for investment.
- It is important to know your buying objectives as well as have an exit plan.
- The exit plan should cover questions like: What is the minimum holding period? What is the targeted profit margin? Should you rent out the property etc.
- Investment is all about entering at the lowest possible point and exiting when you have met your targeted profits.
- Buy what your future buyers or tenants will like, not what you may like.
- For short term investment (i.e., <10 years), go for new launch 99 years condo or 2 bed 1 bath units which will save you at least $100k for one-less toilet as compared to a 2 bed 2 baths unit.
- For married couples, the reason for the purchase is usually for own stay.
- The exit plan is a simple question, how long do you intend to hold the property for?
- If you intend to stay very long, you may want to consider a freehold property which will face no lease decay issues
📌Tip 2: What is Joint Tenancy?
- Joint tenancy ownership is the default option for married couples.
- In a joint tenancy, there are 2 important features.
- Absence of Shares and Right of Survivorship.
- Absence of shares mean that all co-owners have equal rights, regardless of how much one contributes.
- No one can kick out the other owners or sell the property without everyone’s consent.
- When one owner passes away, his (her) interest in the condo will automatically be passed on to the remaining co-owners.
- This is called the Right of Survivorship.
📌Tip 3: When to Choose Tenancy-In-Common?
- Tenancy-in-common is mostly used by buyers who are making a joint investment in a property.
- The shares in the property are clearly divided, making it easier for all parties to sell.
- Upon the death of 1 owner, the deceased’s shares are not automatically transferred to other co-owners.
- Couples who aspire to own a second property should choose Tenancy-in-Common and hold the first property in 99%-1% manner.
- 99-1 holding has 2 key benefits.
- When decoupling, the buying spouse (99% owner) only pays Buyer Stamp Duty on the 1% value of property.
- The outgoing spouse (1% owner) need not pay ABSD on the second property because his (her) stake has been sold.
- There must be trust between the couple because you literally own what is stated in the contract: 99% vs 1%
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