Tips For Managing A Co-Owned Property
Sharing the ownership of an investment property can be a great way for first-time investors to enter the market. Property co-ownership allows you to divide not only the purchase costs but also the maintenance expenses moving forward. However, while joint ownership has plenty of benefits, there are a couple of risks you should be aware of before going down this path.
Know the definition of co-ownership
In general terms, co-ownership is when two or more people have ownership of a property, usually by combining money to put a deposit down or merging borrowing power to secure a mortgage from a loan provider.
According to Queensland state legislature, Section 33(i) of the Property Law Act 1974 stipulates that any property may be held by two or more persons under a “joint tenants” or “tenants in common” arrangement. Under this type of agreement, the entire interest of the property under joint ownership and none of the property is owned individually.
Legislation differs across Australia, so be sure to check with your relevant and updated legislation in your state or territory.
Know your role
It’s important to be aware of these definitions to understand your responsibilities as a co-owner, particularly in the case of a change in ownership. For example, depending on the agreement, shares and interest do not have to be equal. If one of the co-owner dies, their share will automatically be transferred to the surviving co-owner/s. However, if shares and interests are not equal, they do not automatically pass onto any co-owner should one die.
Avoid these risks
Usually, disputes arise in a co-ownership due to co-owners having joint and service liability. If using the property as security for their mortgage, co-owners are jointly liable for each other’s debts.
Co-owners can also run into issues when the property is to be sold or refinanced and when it’s time for mortgage repayments. Splitting income and costs associated with the property is also another source of disputes.
A change in co-ownership has potentially high costs as this will mean finding a buyer for your part, which is typically more difficult than finding a buyer for the entire investment property.
This is why a co-ownership agreement should be secured before purchasing a property. This will serve as insurance if ever issues and disputes arise. The agreement will also serve as a guide on how the property should be managed and obligations involving each party.
Hire a property manager
Managing a property with other people might seem less difficult, but as previously outlined, it can also be the source of disputes. The easiest way to ensure that your jointly owned investment property is taken care of is by appointing a property manager to look after the property on your behalf.
They can keep records, oversee maintenance, conduct inspections, market the property, screen tenants and so many more management tasks. It will require paying a fee for their services, but a property manager will save you and your co-owners plenty of time, stress and arguments.