Boca Raton Luxury Home Investment 101
While the real estate market continues to heed some decent results with low rates, newer homebuyers are still thinking about investing. Since many of the millennials and some 1st time home buyers are seeking affordable solutions for buying a home, the luxury market seems to be more impressive when looking to share the expense with a friend. This article describes the least you need to know about investing in a luxury condo with a friend and is titled “Boca Raton Luxury Home Investment 101”.
Millennials Are Buying More Expensive Homes and Partnering with Friends
According to Realtor.com, their Q1 Generational Propensity Report, Millennials are taking on more jumbo mortgages than the Baby Boomers. While that may be the case, there are scenarios where this generation is buying more expensive properties with less down than previous generations. In markets such as Miami, Fort Lauderdale, and Boca Raton, many of these buyers are seeking the help of family and friends to live in a high-end home and share the expenses. In today’s economy, there’s plenty of younger generation who have high-earning incomes. However, the individuals may still want to partner with someone, rather than be the sole homeowner.
Moreover, many of these younger folks enjoy the idea of luxury rather than a start-up home. Hence, the affordability of the condominium category. However, if you’re looking to invest with another individual, here are some parameters.
Hire a Real Estate Professional When Splitting the Mortgage
Hire a Real Estate Attorney to draft up your contract. Whether you’re splitting the responsibility 50/50 or some other ratio, a real estate attorney should be involved. An agreement needs to be in place if your parents purchase with you. Hiring an attorney is not only smart, but it’s also necessary as they can protect both or all parties if there is an issue. Also, everyone knows and understands their role and investment.
Your Waterfront Property Could be Under an LLC
In the case, you may be buying a vacation property, creating a Limited Liability Corporation (LLC) may be most viable. People who are looking to purchase a beachfront or waterfront condo avoid having their name in public. An LLC would protect you from legal issues if someone were to get injured while on your property. Many people have an LLC through their businesses may choose to use that as a way of buying another home. Also, when partnering with another buyer means each member on the agreement must file personal income taxes, but the LLC isn’t responsible for the taxation. Again, it’s essential to speak with a legal attorney to determine the best interest of partnering with someone on a real estate deal.
Credit Scores for You and Your Friend Could be in Jeopardy
Investing in real estate with a friend is also beneficial. There are shared monthly expenses, easier qualification, and home equity gains. However, you can also run into difficulties such as degradation of your credit score. Keep in mind, if your friend or family member defaults on their end, both scores will be affected. Before committing with another party, be sure to do your due diligence such as running credit reports, finding out other assets, and so forth. The tasks may seem daunting, but in the long run, it’s necessary.
Partnering on a Luxury Condo Could Be Beneficial When It Comes to Down Payment
Another benefit when buying a home with someone else is you can split the down payment costs. In most cases, you’ll need at least 10% down. However, if you’re seeking luxury properties that amount may change. No matter if it’s 10 or 20% you’ll have the ability to share these expenses and closing costs with the other homebuyer. Your down payment can make a significant impact since the selling agent will most likely see the advantages of more money down. This can also deter your lender from going sideways on the mortgage since there’s more cushion in the event you and your friend part ways and default on your loan. Nonetheless, you’ll need to discuss the perimeters with a legal representative if working with another buyer.
Understand the Difference Between Joint Tenancy and Tenancy in Common
Be sure to understand the difference between joint tenancy and tenancy in common. These are both title terms and need to be understood entirely when buying property or co-owning. The most significant difference Joint Tenancy includes a survivorship agreement where the other homeowner assumes responsibilities and ownership if the other party is deceased. Tenants in common seem more advantageous for situations or people who plan on using the dwelling as a vacation property. Either way, your agent will help to guide you along with your attorney to select the best practice.
Create a Termination Plan with Your Real Estate Attorney
Be sure to have a termination plan when buying a home with a family member or friend. Everything seems like the moon, stars and sun are aligning for you and your co-owner to buy a place together. However, if things go sideways, you’ll want to have a way to exit with grace on your loan. You’ll need to have your real estate attorney determine how you’ll get out of from under the mortgage should things go a-rye. You’ll also need to know what the value is on the buyout should either person want to take that route. In some cases, your attorney may advise you to buy a life insurance policy to protect the assets from going into probate. No matter what the deal is, having a good lawyer is imperative.
Understand the Risks of Co-Ownership in Florida
Partnering up with someone you know to buy a home is both beneficial and risky. However, if you have a good understanding of the legal parameters, you’ll find this to be yet another way to buy. In most scenarios, rent is more expensive and less beneficial than homeownership, whether you’re working as a team or not. Florida has three kinds of ownership when two parties are joining forces to buy a home. Your attorney will advise you on the procedures, but to give you an idea, terminating a co-ownership can be sticky.
For instance, in the State of Florida, the homeowners have the right to sell their share of interest with a stranger or other family member. You need to be aware; your partner can do this without your consent. These are some real issues you will want to understand how to handle in the event this happens completely.
If you’d like to learn more about selling your shared property, our agents can be of assistance. Contact us today to learn more.