Real estate experts say buying with a sibling is an increasingly popular path to homeownership that can be an overwhelmingly positive experience for both parties, but warn there are serious considerations.
During a previous period of exceptional growth, sisters Sara and Maraya Bell found they were priced out of Sydney’s Northern Beaches, where they grew up.
Back in 2008, they decided that uniting was their only way forward.
"All I could afford in this area was a tiny studio apartment," Sara said. "My sister had no savings, but we decided to look at going in half each."
Building seemed like the best option, so they could design a home with two independent living quarters.
Back then, Sara was 27 and single while Maraya was 30 with two young children. They secured a joint loan then found a flat block of land measuring around 700sqm.
"On the spot, we put a deposit down of around $10,000 for the land and it went from there."
In 2010, with their dream home built, they divided their loan into two separate mortgages and moved in.
They still live happily together now, though the household has swollen to nine. Sara lives upstairs with her husband and two children, while Maraya lives downstairs with her husband and three children.
"We have a shared entry,” Sara said. “You then go through one door to her house and one to mine.”
Both dwellings have three bedrooms, one bathroom, a kitchen, laundry and lounge room, but the two families share the garden and swimming pool.
On the whole, it's been harmonious, Sara said. Wonderful, even.
"We absolutely love it. Even if I was given a million dollars and I could buy another house, I would stay where we are."
Sara and Maraya go halves on everything – bills, rates, insurance, and maintenance — and they've saved a bucket in babysitting costs.
"I love that it's very communal. You're never lonely," Sara said.
"Now our kids go to the same school, so we share the pick-ups and drop-offs, and all the kids are great friends as well."
The downside? The electricity usage, Sara said.
"They would just go out and leave the lights on while I'm really careful. That bothered me, so we got solar panels put in."
She's learned that communication among the four adults is key.
"We've become more considerate. We talk about everything. Everything we do, all four of us have to agree."
Co-buying means stronger together
The housing affordability crisis is driving more siblings, even friends, to purchase homes together, said Brisbane-based finance consultant Victor Kalinowski.
"They're saying: 'We want to get started but we can't afford a house, so perhaps we can do it with someone else'." There are clear benefits, he said.
"It allows you to buy sooner and you'll have more of a choice with a bigger budget, so you can look at bigger properties in better areas.
"You'll also have a smaller financial commitment; each family member can contribute a smaller deposit and have lower home loan repayments."
It’s a way of getting onto the property ladder together when it might not be possible alone, he said.
Going in with a sibling will not only elevate a buyer into a "completely different price point", but also provide a comforting presence during a stressful time.
"It's an intimidating process, especially if you've never done it before,” Ms Smith said.
"I think for some families, it could work really well, especially tight-knit families that are used to helping each other out."
Keeping finances separate
Siblings (or friends) buying property together can either take out a joint home loan or separate loans linked to the same property, known as a 'property share loan'.
A joint loan, usually chosen by couples, assumes finances are entwined in one household. This means each party is liable for the full loan if the other defaults.
This isn't ideal for siblings or friends who would like to maintain their financial independence across two individual households, Mr Kalinowski said.
"If your sibling loses their job, has an accident or you have a fight, suddenly you are fully liable for both shares of repayments, which can affect your personal credit history."
Meanwhile, a property share loan allows each applicant to have their own separate loan, so if one defaults, the other's finances remain unaffected.
"Separate loans are always the way to go,” he said. “They reduce your liability.”
Plus, the overall loan will be smaller, so it won't significantly reduce an overall borrowing capacity, which allows a buyer more money to purchase another property with an intimate partner, he added.
The two loans can be equal or unequal in value, enabling each sibling to choose how fast they repay it.
"You can go crazy if you want to and pay your loan off as quickly as possible and the other person can take their time and it doesn't affect either one of you," Mr Kalinowski said.
Another thing worth considering is eligibility for a First-Home Buyer Grant, which can only be used once per person – and once per property.
If siblings who met the criteria bought separate properties, they could both access the grant.
Talk about the future
While there can be benefits to buying with a sibling (or friends), Ms Smith personally doesn't recommend it because "life gets complicated and people change".
"What might work for you right now may not be the case down the track. You might have a new partner in your life and want to invest in something different, or life goals might change and one of you wants to sell."
While it can be easy to think you'll always be able to talk things out, this is often not the case, she said.
"The best way to avoid problems down the track is by creating a written agreement with the help of a conveyancer or property law expert with experience in siblings and friends buying together."
It should cover every possible outcome, including:
What proportions each will contribute to the property’s costs
How the property will be occupied
What will happen if one owner is unable to meet costs or they die
How any debt will be secured against the property
When one can require the other sells
Whether they can find a tenant to rent their share if they want to move out
Whether any security can be held against the property, and
In what circumstances this can be released; and how decisions about the property will be made.
"You need everything in writing, and you need to keep it up to date," Ms Smith added. "And you need a commitment to each other that you're going to leave emotions aside as best you can.
"You need to treat it like a business relationship."
Considering the profit and loss
Sara and Maraya don't have contracts in place, but Sara said she feels financially secure because they have separate loans, and she has saved so much money through buying with her sister in the first place.
"Our mortgage is really low, so even if I didn't have a job anymore or something happened, it's way cheaper for me to be paying my mortgage than it is to be going and renting somewhere."
Sara is keenly aware that when they eventually do sell up, she and her husband will only pocket half the profits.
"We'd still have to buy a house in the same area, so we'd end up having to get another bigger mortgage," she said.
But what if Maraya decided she wanted to sell up and move to Queensland?
"We'd just have to sell," Sara said. "But to be honest, we probably would end up going too."
This article first appeared in www.realestate.com.au