A Guide to Group Buying

Has the thought of buying a property with someone else or with a few people ever crossed your mind? It’s actually possible, but the experience requires discipline.

Buying a property collectively with a relative, either a friend or a family member, is often the ideal solution, especially since access to a property appears to be getting sparse these days. The constraints are numerous: a tightening of mortgage rules, a record high in household debts and difficulties in establishing a budget.

It’s a simple matter of mathematics. The more people are paying for a property, the lesser the amount each one has to pay for it. However, as any other joint enterprise, there are risks. Several things must be taken care of, such as contribution amounts, task distribution as well as the temperament of each and every one.

Hence, the importance of sticking to a protocol, not only to achieve the ultimate goal, which is buying a property, but also to prevent the relationships between the co-owners from going sour.

Erica Nielson, from the RBC Bank, offers advice to help you make your group purchase a success and not a source of problems.

Here is precisely her advice:

  • Agree with each other. Discuss your absolute priorities. Your lists will unlikely be the same. You will have to negotiate and create one single list on which you will all agree.
  • Test your financial strength. Consider different financial scenarios to determine prudent mortgage payments. What would happen if one of you gets laid off or is in financial distress? Discuss it and work out a plan.
  • Record the agreement in writing. Write down a simple document that specifies the financial responsibilities of each co-owner, including the utility, maintenance and moving costs. You might agree with the way you manage the group purchase, but life and relationships change. Therefore, it is essential to have a written agreement to resolve future disputes, if they should occur.

  • Have an exit strategy. In the agreement, specify what the procedure will be if one of the co-owners decides to sell his or her share.