Those readers who have been following me for some time or with whom we’ve already had conversations (if not, book here!), will know that I advocate getting your foot into the market by any means necessary. Remember it is not timing the market, it’s time in the market.
There are multiple strategies to get your foot into the market (which you can read about on the site) but one of our favourite recommendations in larger, more expensive markets is Co-ownership. This can be in the form of a co-venture with someone like us at Ontario Assets, but it could also be between two friends, colleagues or family members. Consider the additional leverage + buying power and/or the generational benefits from seniors’ care or babysitting.
Even the provincial government now agrees with us! They have released a co-ownership guide to spark interest in this strategy and help unburden the ongoing housing crisis in Ontario. Their complete guide can be found here.
However, this is a “conversation starter” of a document at best; lacking details and how-to knowledge. There are many elements to be aware of if you wish to pursue this strategy.
Implications of Co-ownership
Both parties considering the co-ownership of a property must make sure their intentions and goals are aligned and unlikely to change (at least for 2-5 years to make the investment worthwhile.) An end-user, cash flow investor, speculator or those more interested in long-term equity are all going to view the ideal use of a property differently.
Before leaping in with both feet, the parties must agree on what that property will be used for. Even then, conflicts are bound to arise. How will decision making occur, who is responsible for maintenance or management, how will tenants be screened, what if someone dies?!
Unforeseen changes in relationships and situation must be taken into consideration. One owner may see the value in raising rents the allowed amount each year; the other may see it as usury or taking advantage of others. What if one partner is better prepared financially to weather a market shift than the other, who decides what the next move is?
All of these details and structure should be agreed upon ahead of any property purchase with a partner. It should all be drafted into a Letter of Intent and further detailed in a Joint or C0-Venture agreement. Each party should be represented by a separate real estate lawyer who has completed many of these documents in their career.
A knowledgable, experienced realtor, or investment partner, is a must also and should be trusted resource. Having created and structured numerous co-ventures, joint ventures and legal structures we are an invaluable partner or teammate.
We own multiple properties in Co-ownership arrangements and it is a strategy that we love, when its done right, with the right documents and the right partners.