Advice re buying two homes or just one

T

TmcK

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Hello,
My brother and I will be coming into money soon, probably around €300k. At the moment we are both renting and working in Dublin and would like to buy a house with this money in Dublin city.

At the moment we are both single and are happy to live together. Of course, this situation may change in the future and I am wondering whether we would be better off buying two homes now (while the market still has realtively good value) so that if one of us needs to move out in the future we would already have a house rather than having to buy a house at an increased price (this is assuming of course that house prices in Dublin have bottomed out).

If we buy two homes we can live together and rent the other home until either of our situations change.

Any thoughts?
 
There are lots of costs involved in buying and maintaining a house beyond just the mortgage/purchase costs and stamp duty. You are right to think ahead for when inevitably you no longer want to live together. No matter how close you, it will be messy when one or other of you decides to move out.

Regarding your "bottoming out" comment, remember to factor in inflation as it is a factor with house purchases as the timelines are so long.

For example lets say house the house bottomed out today and prices rose at 1% pa. In real terms prices would still be dropping as inflation is normally higher than 1%. Since you are buying for cash, this should be something to take account of in whatever contract you draw up as in short, 1 2012 Euro will be worth less than 1 2020 Euro.
 
Make sure that whatever deal you enter into has an acceptable exit for 1 of the parties if/when he decides to move on. i.e regard the house as an investment rather than a permanent home and ensure that the agreement includes an option for either party to exit the deal, which may or may not involve selling the property.
 
Thanks for the replies

@ryaner, sorry but I don't follow the importance of the effects of inflation. Do you mean that even if house prices start to go up that it won't really make a difference as it will be less than inflation?

@44brendan, this may be over simplified but I was thinking that my brother and I would have a home each but would live together until we needed the other home while sharing any rental income. In this instance would we still need to put together a deal?
 
TmcK said:
@44brendan, this may be over simplified but I was thinking that my brother and I would have a home each but would live together until we needed the other home while sharing any rental income. In this instance would we still need to put together a deal?
Click to expand...

Yes. Lets think of all the messy things that might happen ( It's easier for me to do this, as I dont know you and your brother, so I can be objective).

If you both co-own two houses, you still need an agreement if one of you wants to sell up or wants to live in one house.

If one of you meets someone and wants to move in, or get married, you will need to change the ownership of the two houses so you own one each. If you have already agreed who gets which house, what if the price of one has gone up much more than the other one ?

Rental income is taxable and you will have to cover the costs of renting - insurance / NPPR / repair etc. you should have an annual budget for this and agree how these costs are met.

While you own both houses, how do you pay for maintenance or anyy expensive repair job that is to be done. Can you both afford to split all costs. If not, what is a fair split?

There may be other scenarios, but if you talk them all through and both are in agreement, then you lessen the chance of a row later on.

The inheritance will be no good to you, if you end up falling out with your brother.
 
I don't understand why dont just split the cash, buy a home each, live in your respective houses and rent rooms out if you wish to share. Or if one party wants to buy a home, and the other not, just rent a room to the sibling who has decided to invest elsewhere.

Much cleaner IMO.
 
I would totally agree with cashier on this. I am presuming that you both have reasonable jobs. Good luck to you both
 
It's a very interesting question.

First of all - we don't allow speculation about house prices on askaboutmoney so please don't make comments such as "assuming the market has bottomed out".

No one can predict house prices. In your planning you should allow for house prices to rise and for house prices to fall further.

In general, you should not buy a house unless you know that this will be your home for the foreseeable future.

In general, you should buy as good a house as you can reasonably afford without borrowing excessively.

If you have a decent job and €150k cash, why not borrow twice your salary and buy a house for €250k? This way you won't be moving again for some time as €250k will get you a very good house and a mortgage of €100k would not be excessive.

If you agree with this approach, your brother and you could buy a house between you for €250k. Then when one wants out, the other could get a mortgage to buy him out.

Property is a lot of hassle as an investment. One of its main attractions is that you get tax relief on the interest paid on your mortgage. I don't think it's a good idea to invest cash in property. Check out the Property Investment forum to see the hassle which landlords go through.

If you do buy together, then check out this post

Buying a house with a friend - draft agreement
 
TmcK said:
Thanks for the replies

@ryaner, sorry but I don't follow the importance of the effects of inflation. Do you mean that even if house prices start to go up that it won't really make a difference as it will be less than inflation?
Click to expand...

Nope. I was trying (and failed) to show the effects of inflation. Perhaps the price of Guiness can demonstrate if better http://www.finfacts.ie/Private/bestprice/guinnessindex.htm
1969 it cost €0.20 for a pint
2009 it cost €4.34 for a pint

Round up for a house (based on the above scale, not the real housing scale)
1969 it cost €100 for a house
2009 it cost €2170 for a house

Basically if you buy the house today for 300k, whoever sells their share in say ten years shouldn't be looking for exactly 150k. Obviously if you go halves and sell outright, then it is a fair bit simpler.
 
Do not buy property together as this can and does cause headaches down the line regardless of being family. Prepare for the worse. Each of you should buy a house if that is what you want to do. If you both want to live together after that then agree a rent and bill share. In terms of buying your house if you can get a smalll mortgage do so and keep some cash in reserve for a rainy day. However if it was me I would buy for a max of 150 and put half the money to it. I would not buy an apartment and I would not buy a house which has been built in the last 15 years.
 
Thanks for the replies and information.

@huskerdu - Thanks for those points. I hadn't considered many of them and even though myself and my brother are very close, your right to always assume the messiest situation.

@SarahMc - I had thought of this but both of us would rather live together rather than looking for a tenant to house share although I haven't completely discounted this possibility.

@cashier - I wasn't aware of the rent a room scheme. I will check it out and thanks for pointing it out to me.

@Brendan Burgess - Apologies for the unintended speculation. Our guiding principle about buying a house is that we see it as a home and somewhere we would be happy to live in for the foreseeable future.
I personally wouldn't get a mortgage as I'm not in a full time position. The option you mention, buying a house between us for €250,000 is the other option we are thinking about as opposed to each of us buying our own smaller home. My fear is that in say 4 years time if one of us wants to move out it will be more difficult to buy a house than it is now.
Thanks for the info re investing cash in property. I am new to this.

@ryaner - thanks, that cleared it up.
 
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