Invest Together Or Separately, That Is The Question
Should couples invest together or separately, that is the question. Why do some couples choose to Lock their property portfolios out of the relationship?
When many couples tie the knot or unite at a more established stage in life with property portfolios and other significant assets, not all of them choose to merge their possessions. For a multitude of reasons, some couples prefer to come together in love but remain divided with their property portfolios.
Two profiles of couples that typically engage in separate property investing are the ‘uncertain’ and the ‘been burnt before’.
Often people in their late 20s or 30s adopt the position of having ‘my and our money'. They tend to keep their major finances separate and have a mutual understanding that even though they share a lifestyle together they will continue to hold separate asset bases.
The second profile that typically adopts this strategy is the couple that has already been through a tough relationship break up and feels a little beaten up after the division of finances and is wary about the thought of sharing assets again.
Why should a couple maintain a separate portfolio?
By investing separately, in some cases, each individual can increase his or her borrowing capacity, while in other cases it can be just the opposite. While this idea might puzzle some investors, assuming that two incomes are better than one, not all lenders agree.
Lenders do vary a little but it comes down to who you're joining forces with.
If two people get together in a relationship and one has assets and good credit history while the other has maxed out credit cards, a car loan, a child and a low income then that would suck the life out of an application in its own right. Investing in separate portfolios often only works when a couple comes together minus the financial baggage from a previous relationship but instead some investment properties.
It's a tax thing
Some couples choose to invest separately (in the eyes of the tax department) to gain a strategic tax advantage with their portfolios. This scenario tends to occur so it looks like the couple is building separate portfolios but the reality is they're not. It makes sense that the highly negatively geared investment properties should be in the name of the partner with the highest income and that the cash flow positive properties would be in the name of the partner with the lower income.
Apart from this, there aren’t many advantages to building a portfolio on your own in a relationship, unless a couple is unsure about staying together or not married yet. From a lender's perspective, it's a lot less complicated to assess just one applicant's assets, liabilities, income and expenses as opposed to assessing that of two individuals.