How to Buy Property With a Friend or Family Member in Australia

Buying property with someone other than a spouse or de facto partner is becoming more common in Australia, particularly as affordability pressures push single buyers to pool resources with friends, siblings or parents. Done with the right preparation and legal framework, co-purchasing can be a practical path to property ownership. Done without proper documentation and clear agreements, it can create expensive disputes and difficult exits.

Why Co-Purchasing Is Appealing

The financial logic is straightforward. Two buyers with separate incomes can:

Combine borrowing capacity to qualify for a larger loan than either could access individually.

Pool savings to reach a 20 per cent deposit faster, avoiding LMI.

Share ongoing costs including mortgage repayments, council rates, insurance and maintenance.

For buyers in expensive cities who would otherwise be priced out of the market, this can mean the difference between owning and renting indefinitely.

How Lenders Assess Joint Applications

When two or more people apply for a home loan together, the lender assesses the combined borrowing capacity based on all applicants' incomes, expenses and credit histories.

All applicants are jointly and severally liable for the full loan amount. This means if one co-purchaser cannot meet their repayments, the other is responsible for the entire debt. Lenders do not divide the loan between applicants.

Both applicants' credit histories are assessed. One applicant with a poor credit history can affect the overall application outcome even if the other has a clean record.

Ownership Structure: Tenants in Common

When buying with a friend or non-romantic co-buyer, the property should almost always be held as tenants in common rather than joint tenants.

As tenants in common, each owner holds a defined share of the property. The shares do not need to be equal. If one buyer contributes 60 per cent of the deposit, their ownership stake can reflect this at 60 per cent.

Each owner can deal with their share independently: leave it to anyone in their will, sell it (subject to the co-ownership agreement) or mortgage it in some circumstances.

As joint tenants, each party owns the whole together, and on death the property passes automatically to the surviving co-owner regardless of the will. This is usually appropriate for married couples but is not appropriate for friends or unrelated co-buyers.

The Co-Ownership Agreement: Non-Negotiable

A formal co-ownership agreement, drafted by a solicitor, is not optional when buying with someone outside a marriage or de facto relationship. This document governs the arrangement in writing and should address:

Ownership shares (percentages and the basis for them).

How ongoing costs will be shared, including mortgage repayments, rates, insurance, maintenance and any capital works.

Decision-making processes for major decisions such as selling, renovating or refinancing.

What happens if one party wants to sell but the other does not.

What happens if one party cannot meet their financial obligations.

What happens if one party dies.

Exit provisions, including right of first refusal for the co-owner, the process for valuing the property and the timeline for any forced sale.

Without this agreement, disputes between co-owners must be resolved through the courts, which is expensive, slow and damaging to the relationship.

What Happens If One Co-Owner Wants Out

This is the question that breaks most poorly structured co-purchase arrangements. If you buy with a friend in your late 20s and one of you forms a long-term relationship, moves interstate or simply wants to access their equity five years later, you need a clear pre-agreed process.

The co-ownership agreement should specify:

How the buyout price is calculated (typically by independent valuation).

How long the remaining co-owner has to arrange financing for the buyout.

What happens if the remaining co-owner cannot finance the buyout within the agreed period (typically, the property is sold).

Right of first refusal: before selling their share to an outside third party, does the co-owner have the right to buy it at the agreed price first?

The Financing Challenge at Exit

The exit point is where many co-purchase arrangements run into difficulty. If Co-owner A wants to sell but Co-owner B wants to buy them out, Co-owner B needs to refinance the loan in their sole name, demonstrating they can service the full debt independently.

This requires adequate income, satisfactory credit history and a loan-to-value ratio that meets the lender's requirements at the time of refinancing. If Co-owner B cannot qualify for the full loan alone, a forced sale may be the only option.

Before you enter into a co-purchase arrangement, both parties should independently check whether they could service the full loan alone, at least notionally. This does not need to be a hard requirement, but it is important to understand what a single-owner refinance would require.

Tax Considerations for Co-Purchasers

Each co-owner is assessed separately for tax purposes. If the property is owner-occupied, the principal place of residence CGT exemption applies to each owner's share when the property is sold, provided each has lived in it as their principal place of residence.

If the property is purchased as an investment by co-buyers who do not live in it, each owner's share of rental income is assessable and each owner's share of deductible expenses is claimable, proportionate to their ownership percentage.

Land tax is assessed separately in each owner's name based on their share of the property. Depending on each owner's total land holdings, this may or may not push either party above the relevant state threshold.

Is Co-Purchasing Right for You?

Co-purchasing with a trusted person and clear legal documentation can work well. The risks are manageable with proper preparation.

The arrangement is most likely to succeed when both parties have broadly aligned goals for the property, a clear exit plan is agreed before purchase, the financial arrangements are documented formally, both parties are genuinely comfortable with the joint liability and the relationship can withstand a business disagreement if one arises.

Use the Borrowing Capacity calculator at HomeLoanTools.com.au to model combined borrowing power, and the Stamp Duty and Purchasing Power tools to understand the full cost of any co-purchase.