July 10, 2023 • 28 mins
It's a spicy episode today! Buying a property with your partner is considered a typical process that many couples go through. But whether you're looking to purchase an investment or your dream home, there are so many factors to consider before you dive in. You're in luck though, because Jessica Ricci and Victoria Devine are here to break down the many legalities involved and things you may need to consider before making this big commitment.
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Episode Transcript
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Speaker 1 (00:00):
The Property Playbook would like to acknowledge the traditional custodians
of the lands of where this podcast is recorded. There
were wondry people of the cooler nations acknowledging the culture,
the history, and the connection to the lands of what
we call home. Let's get into it.
Speaker 2 (00:27):
Hello and welcome to The Property Playbook, the podcast that
takes you from A to V of all things property.
My name is Jessica Ricky and one day I would
really like to buy my first home. But having spoken
to our community a lot, I feel like it's not
just me. So I've pulled together my friends and the
best property experts that I know to help us all
get on the same page. The Property Playbook is a
(00:48):
non judgment zone. We're not here to make you feel
like you're missing out or behind. We need to help
you get educated and achieve your goals, which is exactly
how the property process should feel. We talk about everything
from saving your deposit to styling your home for sale,
and why on Earth we should care about interest rates.
We've got a Facebook group where you can share your
journey and ask questions direct to us, and an Instagram
to keep you motivated, as well as an online course
(01:10):
that's coming really soon to literally hold your hand every
step of the way. But we'll get onto that soon.
So today let's dive in. This week, we're talking all
about things you need to consider when you're purchasing property
with your partner, which I know is a little spicy,
So I've brought in my friend Victoria Devine today to
help me answer all of the juicy questions.
Speaker 3 (01:28):
Thanks for having me on your show, Jessica.
Speaker 2 (01:30):
I shall welcome anytime.
Speaker 4 (01:32):
I love this, let's talk about it.
Speaker 3 (01:35):
I think you are absolutely correct it is a bit
of a spicy topic, but we need to all be
on the same page, so let's dive straight in.
Speaker 2 (01:42):
All right, Can you tell me a little bit firstly
about why should we even be thinking about purchasing property
with our partner, because I think it's such a common
part of the process a lot of people do purchase
with their partners that it's probably something that they're not
giving a second thought.
Speaker 3 (01:56):
To, and I feel like it's an exciting process right
like here in Australia in particular, it's such a relationship milestone,
Like yeah, first you go on a date, then you
go on multiple dates, then they ask you to be
their partner right or gets official. Then you start introducing
them as your partner or boyfriend or girlfriend or whatever
you call them. Then maybe there's a property purchase in
(02:19):
the future, or maybe a ring or kids. It's such
a stereotypical next step. I feel that so many of
us go, all right, well, if our relationship is quote serious,
we must be looking at property together. However, there are
lots of reasons you'd buy together. The number one reason though,
is purchasing power, right like, two incomes arguably.
Speaker 4 (02:38):
Going to buy you a bigger property than just one,
and given property prices, especially here in Australia, especially right now,
two incomes is going to get you far further.
Speaker 3 (02:49):
Does it mean that you need another person to purchase.
Absolutely not. You're on the journey solo, which I think
is very, very exciting. However, if I double dre income,
that'll make laugh a little bit easier.
Speaker 2 (02:59):
Absolutely they would. For sure.
Speaker 3 (03:01):
There are lots of other reasons why people might purchase
with their partner, and that could be just to get
on the property ladder, or to create an investment opportunity,
or even just to create a home. Everybody's reasoning is
really different. But I do think it's really important before
you get there to talk about your money values and
talking about how that home loan is going to be structured,
(03:21):
because just because you're in a relationship doesn't mean you're
both equally contributing, and it doesn't mean that you both
want the same things or that you're on the same page.
So I think it's really important to kind of put
all of those things on the table to begin with,
and that's exactly what this episode is for.
Speaker 2 (03:35):
Incredible do we need to factor in as well? I
suppose like it sounds all really good and easy, like
two people doubly incomb hooray, but getting the home loan
as well right is probably something you need to take
into consideration because you might have different credit histories, or
you know, one person might have been better with money,
one person might not have been, and that can be
impacted to your outcome right.
Speaker 3 (03:55):
One hundred percent. And I think it's really important to
talk about these things because as much is this stuff
isn't nearly as sexy or as fun as going to
come out and picking new home furnishings. I think talking
about the structure of the loan and actual property ownership
as well as talking about some what ifs is going
to make that journey in the long run a lot
easier and put you in the driver's seat, because not
(04:16):
everyone comes to the table with the same thing, Like Jess.
Let's say you did want to purchase with your partner.
You've been saving for literally years and you have a deposit.
Your partner might not. So does that mean that you're
both at fifty to fifty in that property just because
you're purchasing it together?
Speaker 2 (04:30):
Yeah? Really good point. I want to ask about that
actually because something I hear people talk about a lot
or a phrase that hey people use is tenants in
common and they talk about that in relation to two
people in the same property. But then to me, tenants
is like you're renting a property, So what does that mean?
Speaker 3 (04:44):
Look, there are two different ways that you can purchase
property here in Australia. So the first is joint ownership
and then the second is tenants in common. And when
you are purchasing property with a partner, ownership is generally
set up in either joint tenants where you each own
fifty percent of the p wham bam, thank you ma'am,
or tenants in common where the percentage of ownership actually
(05:05):
varies based on how much you've personally contributed, which most
of us don't think about because purchasing a property is
so exciting and it's arguably very stressful, and you might
go down to the auction by the house and both
just joint. The sign and the default is often just
joint ownership. It does take a few more steps to
get tenants in common, however, it's really important. There are
(05:26):
lots of legalities around this, and we did discuss it
on the She's on the Money podcast when we had
my friend Lucy from Heads and Heart estate planning on
if you want a deeper dive into I guess the
legal side of things, but essentially it comes down to death, Jess,
and with joint ownership, what happens is the surviving owner
automatically gets the other half of the property, whereas tenants
(05:49):
in common there might be different semantics around who gets
what and wherein it might go to the estate or Jess,
if you own that fifty percent of that property, it
might actually go to your parents, and then they need
to work out if they're going to sell or if
they're going to gift it to someone, or what they're
going to do. So tenants in common, which you've specifically
asked about, can actually be used if parties are contributing
(06:09):
different deposit amounts, which I think is really good and
that can be factored in when there's property division in
the future. So laid it down the track, Jesse. When
you're like, all right, well, we're buying our second property,
or we actually just want to sell because our relationship
has dissolved, that means that maybe you get seventy percent
and your partner gets thirty percent. Or it might mean
that you just get your money back for the deposit
(06:30):
because you and your partner contributed different amounts to the
deposit and you get your cash back essentially. And then
maybe because you've been making equal mortgage or payments, you
actually split that fifty to fifty. Okay, So there's lots
of different ways things can be divided. So let's do
a little example because I love a good example. So
if someone contributed a two hundred thousand deposit and then
(06:52):
their partner they added one hundred thousand dollars to a
deposit for a million dollar property, which, let's be honest,
those numbers sound terrifying. It's actually the average teer in Melbourne.
When it comes to property purchasing, Yeah, it actually gives
me the ick. But ownership would then be split fifty
five percent to forty five percent because they're actually contributing
different cash mounts. Now. Tenants in common is also generally
(07:15):
a pretty good arrangement when it comes to a state
planning because it actually makes things really easy and you
can pass it on to someone else or Jess, you
might have a sister, which you don't, but you might
have a sister that you want to pass your property
to if you pass on, and maybe you don't want
your partner getting it for some reason, or that's just
not the thing that you want to leave to them.
You're like, no, my sister doesn't have property if I'm
(07:36):
not around. I want her to carry on that legacy.
And it gives you a little bit more flexibility when
it comes to a state planning, which you know, I
work in finance. I'm obsessed with making sure that everybody's
eyes are dotted and their teas are crossed. And that's
one thing that I have a lot of conversation about
because so many of us just assume, all right, well,
I'll just ride in my will, that my partner gets it,
(07:57):
or I'll just ride in my will that it goes
to my parents. Well, actually, if the ownership structure isn't correct, Jess,
that's not going to happen, even if it is in
your will, because technically the law overrides what your wishes are.
Speaker 2 (08:10):
Yeah, okay. It always sounds pretty good in terms of,
you know, making it equitable. We talk a lot about
you know, equality versus equity, and you know, if one
person is earning more, maybe they want to be contributing more.
And that sounds like a really good way to set
it up so that the portion that you own is
relative to the portion that you contribute. And I'm assuming
you could adjust that over time. You know if maybe
(08:30):
right now I'm earning double my partner, but then one
day he doubles me, we could change that down the line, right.
Speaker 3 (08:36):
Yeah, you absolutely could. There might be some issues. Obviously,
things are really different based on what state or territory
you are in, because each state and each territory has
different property laws, especially when it comes to family law.
So you would need to look into it. And to
be honest, I know it's another cost, but I always
think chatting to a lawyer before you make the biggest
(08:56):
purchase arguably of your entire life. Is a very good investment,
but it would be something that I go, you know what,
do consider this because it's not a little decision to make.
Speaker 2 (09:07):
Yeah, okay, well those are all the positives I suppose.
Are there any negative things that we kind of need
to consider?
Speaker 3 (09:12):
I mean, there are a few different pros and cons. Right, Like,
you're looking at it and you're going, all right, well,
I still want to be in control. Maybe tenants in
common is what I want to do. But it's not
as cleanly cut as we are actually explaining it. So
if you're buying as tenants in common, it does mean
that you are jointly responsible for the loan. The bank
es they don't care. They're like, we just want to
get paid. You're both on the hook for this. So
(09:35):
even if you own different percentages and you and I,
let's say when I purchased a property together Jess and
I was like, well I want to own thirty percent,
you own seventy percent. Bank doesn't care. They just want
their money. They're going to chase me for the amount
if you're not paying Jess, So the bank aren't going
to go oh, the no worries. Only pay thirty percent
of your mortgage portion and we'll chase Jess for the
(09:55):
rest of it. They're not going to do that. They're
just going to go, well, your name is on the
dotted line, we need to be paid, and it's a
joint responsibility, so it's not divvied up in the same
way that family law would treat it when it comes
to the bank. So that can be something that you go, ooh,
that's a risk because what if I don't trust you one,
I'd say, don't buy a house with you. But like
at the end of the day, like if we let's
(10:17):
say we went through a little bit of a messy
divorce and I'm like, well, you won't seventy percent of it.
You have to pay it, and you decide not to,
I'm actually on the hook. It can be a little
bit of a risk. But as soon as you buy
property together, family law basically kicks in and it doesn't
really matter if you've been together for six months or
six years. It automatically puts you in a position where
the law is going to look at you as a
(10:39):
de facto couple. So sent link payments any type of
benefits that you receive are going to automatically be seen
as a joint decision as opposed to an individual. Even
if you're moving in for like the very first time,
exactly exactly, because you're purchasing a property together, the law's like, well,
you're pretty serious about this. We're going to take you
seriously because that's what you're asking to be taken.
Speaker 2 (10:59):
Ask so what does that guess mean? Like, if that
happens to me, what impact does that have?
Speaker 3 (11:04):
So it doesn't have a massive impact except for in
the eyes of the law essentially, so day to day, Jess,
if you and I moved in together, we purchased a
property together, and the law's like, you know what, you're
an official, de facto couple. Neither of us receive benefits
from sentiling. However, if I was on Sentilink and you weren't,
and you're the reason we're purchasing because you've got this
really great job and we've just met and we're so
(11:25):
excited and we're going to move in together, my sendling
payments are now going to be assessed on our joint
income as opposed to my individual income. And because you're
you know, you're a ball ad jess you're able to
afford a property. Sentling is very likely to turn around
and be like, oh, well, your joint income's high enough
that Victoria is no longer going to get her payments.
So it's really important to take into consideration any semantics.
(11:46):
And we've seen it in our community where one party is,
you know, a couple of years older, ready to purchase,
and the others at UNI and able to get sentiling payments,
and they make this decision and it actually puts them
behind because now one party in the real lifeationship has
absolutely no income, and it's just because they thought that
they were doing the right thing for future them, but
they didn't consider the benefits that they were getting at
(12:08):
that point in time. Does that make sense?
Speaker 2 (12:10):
Yeah, okay, that does make a lot of sense. I know,
over and Chetes on the money. Not too long ago,
we spoke about binding financial agreements, which is what I
kind of always had in the back of my mind,
is like the option that I would consider. I'd never
really thought about tenants in common. What's the difference?
Speaker 3 (12:24):
Okay, so it doesn't matter. There's no difference whether you're
a tenant in common or you have joint ownership. A
binding financial agreement is an agreement between you and I, Jess,
or you and your partner, or you and somebody else
that you have decided to have a financial relationship with.
And it's essentially one of the only ways that you
can get out of family law. So I'm not saying
that you can just get out of you know, your responsibilities,
(12:47):
but you and I might sit down and create this
binding financial agreement Jess and say, all right, Jess, you
have contributed far more deposit than I have contributed, and therefore,
when we sell this property, you will get all your
cash back. Then we'll split the profit or what's left
fifty to fifty. And that's something that I think is
really important. It can also be a binding financial agreement
(13:07):
where Jess, you and I are in a relationship and
we're really happy, but you're in a circumstance where you
can buy a house, and you're like, well, be like,
I know we've only been together for six months, but
I want to buy this house, and I don't really
want you laying a claim to it because you're not
putting a dollar into this property. A binding financial agreement
would say, okay, Jess is buying a property that's one
hundred percent her asset. And in the circumstance where our
(13:31):
relationship dissolves, Victoria, you get not one thing. And I
would sign that and be like, yeah, okay, no problems, Jess,
Like that's not mine to begin with. But when relationships dissolve,
things can get really messy, and he said, she said, happens.
And it's one of those things that I recommend that
every single couple should have. Albeit it can be a
little bit pricey. So as much as a lot of
(13:52):
people see it as a luxury, I actually think it's
a necessity, especially when it comes to protecting yourself financially.
And look, there's different ways that you can divide it up,
and you can put different times in different scenarios. And
it might be a binding financial agreement, Jess, because you
and I have just met and you're going and buying
this property. But we're in a pretty serious relationship, so
maybe the binding financial agreement only lasts for five years,
(14:14):
So we say, you know what, don't worry about it
five years, and then if something happens after that, we
will split it equally. The other thing that I think
is important to take into consideration here is things like income.
So I have a business, Jess, I don't know if
I want you to take half the revenue from my
business if we break up later down the line, because
you need some kind of alimony. Yeah, and I mean
(14:35):
alimony is not really a word that is used in Australia,
but it is something that people can go for. But
it is really important to realize that essentially a binding
financial agreement is a prenup. So you know how in
America they say we want prenup, we want prene up. Yeah,
but they say that, but theirs is a lot more
(14:56):
sticky than ours is. Ours can be contested in court.
Ours can fall apart. So as much as you know,
we would love for it to absolutely be a hard
and fast you said this, you signed this, this is
what's going to happen. Unfortunately, if someone does want to
contest it, they can, and we've had people in our
community go, well, it's not worth the paper it's written on.
(15:17):
But I'd really like to have that paper to begin with,
to have a starting point for conversation.
Speaker 2 (15:22):
Yeah, okay, that makes a heap of sense. I know
we've turned a little bit doom and gloom, but.
Speaker 3 (15:25):
It's not doom and gloom. This is all about protecting
you and putting you in the best position because you're
not saving up. I would argue it's your entire life savings.
When you're purchasing your first home. You're not saving up
to do that, to have it, you know, all taken
away down the track, and the stats are yes that unfortunately,
fifty percent of marriages end up in divorce here in Australia,
(15:47):
and I have a sneaky suspicion that that is only
going to increase over time, and as much as everybody
enters a relationship with the best of intentions, and you know,
I look at it and I go, you know, Steve
and I have a binding finial agreement. I think it's
a waste of time right now. I love Steve, he
loves me. We both really respect each other. But nobody
(16:08):
goes into a relationship or gets married expecting to get
a divorce, right Yeah. So I have sat down with
Steve at a time that both of us want the
best for each other and said, all right, well, you know,
if this didn't work out, which we think it's going to,
because otherwise I wouldn't be spending so much on a
wedding you had a Joe. But if this doesn't work out,
I want the best for you, and right now is
(16:31):
the best time to sit down and go, well, what
would you get, Jess, and what would I get? And
how would that work? And a binding financial agreement. It's
not just about property. It could be assets. It could
be who pays for the dog that we got together,
who pays for like hats? What does that look like,
how does that work? And how many semantics come into
it is actually up to you, but I would absolutely
recommend going and talking to a family lawyer to set
(16:54):
something up. Or you can google the law society for
your state and they can point you in the right
direction of setting something up properly.
Speaker 2 (17:01):
Okay, incredible already, Like you said, it's not all doom
and gloom. We're just trying to feel good and feel prepared.
So we're going to go to a quick break and
then when we come back, I want to talk about
what we do do if the relationship unfortunately does go
south and you have purchased property together. Don't go any
there already, v We're talking today all about purchasing property
with a partner, which is a very common thing, but
(17:21):
I think sometimes something that we're not all prepared for,
and it can be kind of scary because, like you said,
it's a big commitment. It's arguably a really large percentage
of your money if you're me literally all of your
money that you're.
Speaker 3 (17:34):
Looking at your life savings. Yeah, no one saves up
for a property for years and years to then have
a massive pot of money over to the other side
to be like, oh, don't worry, it's just a property
like this is massive.
Speaker 4 (17:46):
Yeah.
Speaker 2 (17:46):
So I want to talk about what happens if you
have property that you have purchased with a partner and
whatever reason, unfortunately that relationship doesn't work out the season
is over. What are the options when you do own
that property, because it seems like, you know what, if
the market's down, maybe you don't want to sell right now?
What can we do?
Speaker 3 (18:04):
And that's where I'm going to go back to my
buying financial agreement because we want to talk about these things. So, Jess,
this is a conversation that you and I should be
having at the very start of our home buying journey.
Not relationship necessarily, but you and I go, all right,
let's buy a house. Yeah, what is the house for
is it for a residential property that you and I
are going to move into, have our kids, and retire in,
(18:28):
and we are there forever in a day? Is it
a property that we're purchasing because we are in the
circumstance where it's twenty twenty two and we actually can't
afford to buy our dream home. Yet it's a stepping stone.
What does that stepping stone mean? Does that mean that
we're buying that house to wait until it increases in value,
sell and then buy our dream property, or is it
a stepping stone to another property to them buy our
(18:50):
dream property. Or is it a stepping stone where we're
not going to sell it, We're going to lease it
out and then we're going to buy our dream property
with the equity in it. Other outcomes. But the conversation
between two people who are looking to purchase property together
should never be Jess, should we buy a house? Or Nah?
It should be why are we buying a house? Is
(19:10):
it our dream house? You would talk about location and
whether it's north facing, or whether we want open plan kitchen, dining, living,
or how many bedrooms we need? But how long are
we planning on holding this? Okay, the next step there is, then,
well what happens if we break up? Are we going
to go all? Right? Well, the property market is a
little bit shot at the moment. Let's just wait until
(19:32):
it's back and then we'll sell it. Are you happy
to lease that property out? Like Jesse, if you and
I have bought our dream house together and then we
break up and I want to move out because I
don't want to see your little face? Are you moving
out too? If so, are we renting that property out?
Maybe you're not comfortable with that. Maybe you're like, well, no,
I wouldn't ever want to rent that property out. I
would want to stay in it. Okay, Well, in that circumstance,
(19:54):
are you paying more of the mortgage? Are you paying
rent in addition to mortgage repayments? What would that look like?
These are conversations that not a lot of people have. However,
it is quite funny and I did this when Steve
and I purchased our first home together. I was like, okay, cool,
Like what's the plan with it? And he's like, ah,
move in? How exciting? And I was like yeah, like
are we selling it? He's like you just got it?
Speaker 2 (20:15):
Victoria?
Speaker 4 (20:16):
Yeah?
Speaker 3 (20:17):
That like, is this our forever home. Will we sell it,
will we lease it out? And we've both agreed that
we're not entirely sure on what that outcome is At
this point. Our ultimate goal would be to never sell
it because we're in a financial situation hopefully one day
where we can buy a bigger house with the equity
that we've built up in this current house, and we
can lease it out and that becomes something that generates
(20:38):
an income for us. But we've had that conversation whereas
Steve might have said, oh, no, I only actually want
to own one property, so we'd have to sell that
one by another one, and I just want to own shares.
Speaker 2 (20:48):
Yeh.
Speaker 3 (20:48):
Does that make sense? So like, everybody is on a
different journey and everybody wants different things, But the outcome
of that is going to look really different whether you
stay together or not, because what if it's th re
assault and you want nothing to do with that partner anymore,
and you're like, I want to get rid of the house.
I don't care how much money I lose. But in
the process of doing that, you're kind of mucking over
(21:09):
the other person as well, and they're losing equity and
they're losing money. And I think it just really needs
to be discussed. First of AJ's like, what happens if
our relationship doesn't work out? And maybe it is as
clean cut as all right, Well, just would sell the
property if we broke even.
Speaker 2 (21:23):
Yeah, what about buying the other person out? I know
someone who purchased a house with her boyfriend and they
broke up and then you know, it was a little
bit messy, and you know, things weren't happy, and she
didn't want to move because it was prime location or
whatever the case was.
Speaker 3 (21:39):
It can be so messy. Honestly, from my personal perspective,
I prefer to get married and try and get out
of that instead of owner property with somebody else. Like,
the financial implications of property to me, are far more
committed than a marriage.
Speaker 2 (21:53):
Yeah, and it was kind of like I think at
the time, she was like, oh, the capital gains, we're
gonna mess up in comfort whatever it was. I don't
remember the ins and outsally, not that they're really that relevant,
but it ended up being that she brought him out.
But there was like a really short time frame that
she had to do that in She had to scramble
to find the money. So what does that system or process.
Speaker 3 (22:11):
Look like it can look like anything honestly, so it
could be really amicable and Jess, you no longer want
to live in the property with me anymore, and you're like,
can you just buy it out? And we might have
a discussion and you're like, look, I just want my
money back, or you might go, well, we bought this
property in the market's doing really well, so not only
do I want my money out of this, but I
also want market value, in which case we're going to
get a real estate agent in to review the property
(22:33):
and tell me what it's worth, and then you're going
to have to pay the other half of that. You
can go back to the bank and do a mortgage transfer,
which would mean getting rid of you from the name,
and then I carry on the mortgage. But I'm assuming
if you've put a deposit in, you're probably going to
want some cash out as well, so we'd have to
build that in as well. However, I think it's really
important to understand that communication is key here, and as
(22:55):
much as it can be really hard, maybe in your
buying financial agreement or maybe in the conversations you have
before we get to this point. We say, Jess, what
if you and I aren't getting on. Do we just
nominate a third party. It doesn't have to be a friend,
it doesn't have to be a family. It could be
your accountant, where you go to your accountant and say, look,
we just want the best possible outcome for both of us.
(23:16):
Can you let us know what that is? And you
pay for that quote advice and make sure that somebody
else is calling those shots. Financial advisor can do that
as well. However, it is really important to communicate and
then when it comes to the actual loan structure, communicate
with your lender, because your lender is very likely to
have a level of flexibility where they're like, all right,
(23:37):
no problems, we might pause some payments for this period
of time and then pick them up here. Or maybe
they have some considerations that they can make to put
you in the best possible position to make it happen.
Like if you need to get out of the mortgage
but you're on a fixed term, maybe they waive some
fees for you. I would argue that in these circumstances,
communication in every aspect is key, but most of us
(24:00):
just want to bury our heads in the end.
Speaker 2 (24:01):
Yeah, let's say you were both living in it, and
it wasn't originally intended as an investment property. That you
break up and you know you don't want to sell
the house because you worked really hard to get it.
Maybe the markets down you're not going to get you
value back off. For whatever reason, it doesn't seem like
the choice you want to make. Can you rent that
property out even though you guys aren't together.
Speaker 3 (24:19):
Yes, of course you can. You just own the property together,
like you still have joint ownership of that property. And
if the circumstances were different and you had, you know,
tendency in common and owned different percentages, you'd still just
go to the real estate agent and be like, hey,
we want to lease this property out. Go through that
property process, and then you'd probably just split the rent differently.
Speaker 2 (24:40):
And so depending on I guess, you know, if the
rent was covering the mortgage, then presumably we'd all just
go to the mortgage. And if you're making profit, then
if you had tenants in common, I assume you'd get
your splits. If I had paid seventy and you'd paid thirty.
Speaker 3 (24:52):
Exactly exactly, and you can actually organize all of that
through your real estate agent. So if you maybe are
a little bit when it comes to a break up
and you I don't really want to have to deal
with my exgess every single week. When it comes to
the rent coming in, you can actually say, hey, real
estate agent, you take your cutout, because the real estate
agent will obviously charge for their services. And then when
(25:14):
you pay us to the rent, can you put seventy
percent into just as account, thirty percent into mine called wambam,
thank you ma'am. And then when it comes to tax time,
I would declare my thirty, you would declare your seventy.
But we do need to take into consideration the property
value as well. But yes, it can be split that way.
And most real estate agents are relatively flexible because they
don't care. They just pop down your account number and
BESB and pay it on automation each and every single month.
Speaker 2 (25:36):
Yeah, okay, last thing I want to ask you about
is if the breakup goes really south, which real salty,
Real salty.
Speaker 3 (25:44):
We've seen it happen.
Speaker 2 (25:45):
We have seen it happen. And you know, sometimes people,
I think, when they're going through a hard time, they
tend to react out of emotion, which is often like
anger or pain, which means that you're maybe not thinking
super logically. What can people do if? Great therapy very helpful,
but what can people do if they go through a
breakup like this and their partner dips out? So if
(26:06):
we have a more each together and you're like screw you,
I hate you, I never want to see you again
and you leave the country, am I stuck with everything?
What resources can I call on?
Speaker 3 (26:15):
Who you can in touch with really depends if you
are tenants in common or you have joint tenancy, because
if you joint tenancy, it was on the both of
you both signed on the dotted line. And if they
can't get in contact with Victoria, they're gonna call, yes,
aren't they? Whereas it if it's different and the split
is different, like, there are definitely different avenues you can
go down. First person, I would call as my family
lawyer and be like, this is the circumstances. What do
(26:36):
I do? How do I chase this? And then there
are bypass laws, so like if they're not doing this,
then they're not doing that. There are definitely things that
you know legally can be done because it's actually enforceable,
Like it's not hey, oh Jess isn't paying well? With me,
it's like, well, actually, you might end up defaulting on
the loan. You might end up in a really significant
financial hole. You might end up with a really bad
(26:58):
credit rating because your partner hasn't been paying and you
just don't have the cash to cover it. Again, it
comes back to communication first with your family lawyer, second
with the bank yep.
Speaker 2 (27:07):
And ultimately when you enter into that homeland, that's a
legal contract, right, So yes, if their name is on
there legally in some way, shape or form, they are responsible.
And I would assume that there would be avenues of
the law that hopefully can protect you. But that's what
your family lawyer could have done.
Speaker 3 (27:22):
Exactly, And it's not something that I can say on
this podcast because it's different for absolutely every circumstance. But
that's why I'm like, look, get a family lawyer, and
if you don't have one, Lucy Percy from Heads and
Heart estate planning is definitely going to be my first
port of call. Because even if she's like, look, I
can't really help, but here's the information, Well, here's the
right contact for you, I would go down that, but
(27:42):
you definitely can take it much further.
Speaker 2 (27:44):
Amazing A bit of a scary one today, but thank
you for me a bit salty, a little bit easier,
a little bit more digestible. But I think that's about
all we have time for today. Just before we head off,
let's quickly wrap the boring but important stuff. The advice
shed on the Property Playbook is generally in nature and
does not consider your individual circumstances. The Property Playbook exists
purely for educational purposes and should not be relied upon
(28:05):
to make an investment or a financial decision. We would
love it if you guys would join our Facebook group.
Our community shares property questions, tips and tricks every single day.
You can search the Property Playbook on Facebook to find us.
You can also find us over on Instagram at Property
Playbook Aus kicking around sharing fun and interesting things. And
if you're feeling generous, maybe leave us a review. Tell
(28:26):
me I'm doing a good job. I'm really trying.
Speaker 3 (28:28):
Yeah, don't see mean things about Jess. It makes her
really sad. Don't do that, it really does.
Speaker 2 (28:32):
But that's about all. I'll see you in the next episode, guys,
See you bye.
The Property Playbook would like to acknowledge the traditional custodians
of the lands of where this podcast is recorded. There
were wondry people of the cooler nations acknowledging the culture,
the history, and the connection to the lands of what
we call home. Let's get into it.
Speaker 2 (00:27):
Hello and welcome to The Property Playbook, the podcast that
takes you from A to V of all things property.
My name is Jessica Ricky and one day I would
really like to buy my first home. But having spoken
to our community a lot, I feel like it's not
just me. So I've pulled together my friends and the
best property experts that I know to help us all
get on the same page. The Property Playbook is a
(00:48):
non judgment zone. We're not here to make you feel
like you're missing out or behind. We need to help
you get educated and achieve your goals, which is exactly
how the property process should feel. We talk about everything
from saving your deposit to styling your home for sale,
and why on Earth we should care about interest rates.
We've got a Facebook group where you can share your
journey and ask questions direct to us, and an Instagram
to keep you motivated, as well as an online course
(01:10):
that's coming really soon to literally hold your hand every
step of the way. But we'll get onto that soon.
So today let's dive in. This week, we're talking all
about things you need to consider when you're purchasing property
with your partner, which I know is a little spicy,
So I've brought in my friend Victoria Devine today to
help me answer all of the juicy questions.
Speaker 3 (01:28):
Thanks for having me on your show, Jessica.
Speaker 2 (01:30):
I shall welcome anytime.
Speaker 4 (01:32):
I love this, let's talk about it.
Speaker 3 (01:35):
I think you are absolutely correct it is a bit
of a spicy topic, but we need to all be
on the same page, so let's dive straight in.
Speaker 2 (01:42):
All right, Can you tell me a little bit firstly
about why should we even be thinking about purchasing property
with our partner, because I think it's such a common
part of the process a lot of people do purchase
with their partners that it's probably something that they're not
giving a second thought.
Speaker 3 (01:56):
To, and I feel like it's an exciting process right
like here in Australia in particular, it's such a relationship milestone,
Like yeah, first you go on a date, then you
go on multiple dates, then they ask you to be
their partner right or gets official. Then you start introducing
them as your partner or boyfriend or girlfriend or whatever
you call them. Then maybe there's a property purchase in
(02:19):
the future, or maybe a ring or kids. It's such
a stereotypical next step. I feel that so many of
us go, all right, well, if our relationship is quote serious,
we must be looking at property together. However, there are
lots of reasons you'd buy together. The number one reason though,
is purchasing power, right like, two incomes arguably.
Speaker 4 (02:38):
Going to buy you a bigger property than just one,
and given property prices, especially here in Australia, especially right now,
two incomes is going to get you far further.
Speaker 3 (02:49):
Does it mean that you need another person to purchase.
Absolutely not. You're on the journey solo, which I think
is very, very exciting. However, if I double dre income,
that'll make laugh a little bit easier.
Speaker 2 (02:59):
Absolutely they would. For sure.
Speaker 3 (03:01):
There are lots of other reasons why people might purchase
with their partner, and that could be just to get
on the property ladder, or to create an investment opportunity,
or even just to create a home. Everybody's reasoning is
really different. But I do think it's really important before
you get there to talk about your money values and
talking about how that home loan is going to be structured,
(03:21):
because just because you're in a relationship doesn't mean you're
both equally contributing, and it doesn't mean that you both
want the same things or that you're on the same page.
So I think it's really important to kind of put
all of those things on the table to begin with,
and that's exactly what this episode is for.
Speaker 2 (03:35):
Incredible do we need to factor in as well? I
suppose like it sounds all really good and easy, like
two people doubly incomb hooray, but getting the home loan
as well right is probably something you need to take
into consideration because you might have different credit histories, or
you know, one person might have been better with money,
one person might not have been, and that can be
impacted to your outcome right.
Speaker 3 (03:55):
One hundred percent. And I think it's really important to
talk about these things because as much is this stuff
isn't nearly as sexy or as fun as going to
come out and picking new home furnishings. I think talking
about the structure of the loan and actual property ownership
as well as talking about some what ifs is going
to make that journey in the long run a lot
easier and put you in the driver's seat, because not
(04:16):
everyone comes to the table with the same thing, Like Jess.
Let's say you did want to purchase with your partner.
You've been saving for literally years and you have a deposit.
Your partner might not. So does that mean that you're
both at fifty to fifty in that property just because
you're purchasing it together?
Speaker 2 (04:30):
Yeah? Really good point. I want to ask about that
actually because something I hear people talk about a lot
or a phrase that hey people use is tenants in
common and they talk about that in relation to two
people in the same property. But then to me, tenants
is like you're renting a property, So what does that mean?
Speaker 3 (04:44):
Look, there are two different ways that you can purchase
property here in Australia. So the first is joint ownership
and then the second is tenants in common. And when
you are purchasing property with a partner, ownership is generally
set up in either joint tenants where you each own
fifty percent of the p wham bam, thank you ma'am,
or tenants in common where the percentage of ownership actually
(05:05):
varies based on how much you've personally contributed, which most
of us don't think about because purchasing a property is
so exciting and it's arguably very stressful, and you might
go down to the auction by the house and both
just joint. The sign and the default is often just
joint ownership. It does take a few more steps to
get tenants in common, however, it's really important. There are
(05:26):
lots of legalities around this, and we did discuss it
on the She's on the Money podcast when we had
my friend Lucy from Heads and Heart estate planning on
if you want a deeper dive into I guess the
legal side of things, but essentially it comes down to death, Jess,
and with joint ownership, what happens is the surviving owner
automatically gets the other half of the property, whereas tenants
(05:49):
in common there might be different semantics around who gets
what and wherein it might go to the estate or Jess,
if you own that fifty percent of that property, it
might actually go to your parents, and then they need
to work out if they're going to sell or if
they're going to gift it to someone, or what they're
going to do. So tenants in common, which you've specifically
asked about, can actually be used if parties are contributing
(06:09):
different deposit amounts, which I think is really good and
that can be factored in when there's property division in
the future. So laid it down the track, Jesse. When
you're like, all right, well, we're buying our second property,
or we actually just want to sell because our relationship
has dissolved, that means that maybe you get seventy percent
and your partner gets thirty percent. Or it might mean
that you just get your money back for the deposit
(06:30):
because you and your partner contributed different amounts to the
deposit and you get your cash back essentially. And then
maybe because you've been making equal mortgage or payments, you
actually split that fifty to fifty. Okay, So there's lots
of different ways things can be divided. So let's do
a little example because I love a good example. So
if someone contributed a two hundred thousand deposit and then
(06:52):
their partner they added one hundred thousand dollars to a
deposit for a million dollar property, which, let's be honest,
those numbers sound terrifying. It's actually the average teer in Melbourne.
When it comes to property purchasing, Yeah, it actually gives
me the ick. But ownership would then be split fifty
five percent to forty five percent because they're actually contributing
different cash mounts. Now. Tenants in common is also generally
(07:15):
a pretty good arrangement when it comes to a state
planning because it actually makes things really easy and you
can pass it on to someone else or Jess, you
might have a sister, which you don't, but you might
have a sister that you want to pass your property
to if you pass on, and maybe you don't want
your partner getting it for some reason, or that's just
not the thing that you want to leave to them.
You're like, no, my sister doesn't have property if I'm
(07:36):
not around. I want her to carry on that legacy.
And it gives you a little bit more flexibility when
it comes to a state planning, which you know, I
work in finance. I'm obsessed with making sure that everybody's
eyes are dotted and their teas are crossed. And that's
one thing that I have a lot of conversation about
because so many of us just assume, all right, well,
I'll just ride in my will, that my partner gets it,
(07:57):
or I'll just ride in my will that it goes
to my parents. Well, actually, if the ownership structure isn't correct, Jess,
that's not going to happen, even if it is in
your will, because technically the law overrides what your wishes are.
Speaker 2 (08:10):
Yeah, okay. It always sounds pretty good in terms of,
you know, making it equitable. We talk a lot about
you know, equality versus equity, and you know, if one
person is earning more, maybe they want to be contributing more.
And that sounds like a really good way to set
it up so that the portion that you own is
relative to the portion that you contribute. And I'm assuming
you could adjust that over time. You know if maybe
(08:30):
right now I'm earning double my partner, but then one
day he doubles me, we could change that down the line, right.
Speaker 3 (08:36):
Yeah, you absolutely could. There might be some issues. Obviously,
things are really different based on what state or territory
you are in, because each state and each territory has
different property laws, especially when it comes to family law.
So you would need to look into it. And to
be honest, I know it's another cost, but I always
think chatting to a lawyer before you make the biggest
(08:56):
purchase arguably of your entire life. Is a very good investment,
but it would be something that I go, you know what,
do consider this because it's not a little decision to make.
Speaker 2 (09:07):
Yeah, okay, well those are all the positives I suppose.
Are there any negative things that we kind of need
to consider?
Speaker 3 (09:12):
I mean, there are a few different pros and cons. Right, Like,
you're looking at it and you're going, all right, well,
I still want to be in control. Maybe tenants in
common is what I want to do. But it's not
as cleanly cut as we are actually explaining it. So
if you're buying as tenants in common, it does mean
that you are jointly responsible for the loan. The bank
es they don't care. They're like, we just want to
get paid. You're both on the hook for this. So
(09:35):
even if you own different percentages and you and I,
let's say when I purchased a property together Jess and
I was like, well I want to own thirty percent,
you own seventy percent. Bank doesn't care. They just want
their money. They're going to chase me for the amount
if you're not paying Jess, So the bank aren't going
to go oh, the no worries. Only pay thirty percent
of your mortgage portion and we'll chase Jess for the
(09:55):
rest of it. They're not going to do that. They're
just going to go, well, your name is on the
dotted line, we need to be paid, and it's a
joint responsibility, so it's not divvied up in the same
way that family law would treat it when it comes
to the bank. So that can be something that you go, ooh,
that's a risk because what if I don't trust you one,
I'd say, don't buy a house with you. But like
at the end of the day, like if we let's
(10:17):
say we went through a little bit of a messy
divorce and I'm like, well, you won't seventy percent of it.
You have to pay it, and you decide not to,
I'm actually on the hook. It can be a little
bit of a risk. But as soon as you buy
property together, family law basically kicks in and it doesn't
really matter if you've been together for six months or
six years. It automatically puts you in a position where
the law is going to look at you as a
(10:39):
de facto couple. So sent link payments any type of
benefits that you receive are going to automatically be seen
as a joint decision as opposed to an individual. Even
if you're moving in for like the very first time,
exactly exactly, because you're purchasing a property together, the law's like, well,
you're pretty serious about this. We're going to take you
seriously because that's what you're asking to be taken.
Speaker 2 (10:59):
Ask so what does that guess mean? Like, if that
happens to me, what impact does that have?
Speaker 3 (11:04):
So it doesn't have a massive impact except for in
the eyes of the law essentially, so day to day, Jess,
if you and I moved in together, we purchased a
property together, and the law's like, you know what, you're
an official, de facto couple. Neither of us receive benefits
from sentiling. However, if I was on Sentilink and you weren't,
and you're the reason we're purchasing because you've got this
really great job and we've just met and we're so
(11:25):
excited and we're going to move in together, my sendling
payments are now going to be assessed on our joint
income as opposed to my individual income. And because you're
you know, you're a ball ad jess you're able to
afford a property. Sentling is very likely to turn around
and be like, oh, well, your joint income's high enough
that Victoria is no longer going to get her payments.
So it's really important to take into consideration any semantics.
(11:46):
And we've seen it in our community where one party is,
you know, a couple of years older, ready to purchase,
and the others at UNI and able to get sentiling payments,
and they make this decision and it actually puts them
behind because now one party in the real lifeationship has
absolutely no income, and it's just because they thought that
they were doing the right thing for future them, but
they didn't consider the benefits that they were getting at
(12:08):
that point in time. Does that make sense?
Speaker 2 (12:10):
Yeah, okay, that does make a lot of sense. I know,
over and Chetes on the money. Not too long ago,
we spoke about binding financial agreements, which is what I
kind of always had in the back of my mind,
is like the option that I would consider. I'd never
really thought about tenants in common. What's the difference?
Speaker 3 (12:24):
Okay, so it doesn't matter. There's no difference whether you're
a tenant in common or you have joint ownership. A
binding financial agreement is an agreement between you and I, Jess,
or you and your partner, or you and somebody else
that you have decided to have a financial relationship with.
And it's essentially one of the only ways that you
can get out of family law. So I'm not saying
that you can just get out of you know, your responsibilities,
(12:47):
but you and I might sit down and create this
binding financial agreement Jess and say, all right, Jess, you
have contributed far more deposit than I have contributed, and therefore,
when we sell this property, you will get all your
cash back. Then we'll split the profit or what's left
fifty to fifty. And that's something that I think is
really important. It can also be a binding financial agreement
(13:07):
where Jess, you and I are in a relationship and
we're really happy, but you're in a circumstance where you
can buy a house, and you're like, well, be like,
I know we've only been together for six months, but
I want to buy this house, and I don't really
want you laying a claim to it because you're not
putting a dollar into this property. A binding financial agreement
would say, okay, Jess is buying a property that's one
hundred percent her asset. And in the circumstance where our
(13:31):
relationship dissolves, Victoria, you get not one thing. And I
would sign that and be like, yeah, okay, no problems, Jess,
Like that's not mine to begin with. But when relationships dissolve,
things can get really messy, and he said, she said, happens.
And it's one of those things that I recommend that
every single couple should have. Albeit it can be a
little bit pricey. So as much as a lot of
(13:52):
people see it as a luxury, I actually think it's
a necessity, especially when it comes to protecting yourself financially.
And look, there's different ways that you can divide it up,
and you can put different times in different scenarios. And
it might be a binding financial agreement, Jess, because you
and I have just met and you're going and buying
this property. But we're in a pretty serious relationship, so
maybe the binding financial agreement only lasts for five years,
(14:14):
So we say, you know what, don't worry about it
five years, and then if something happens after that, we
will split it equally. The other thing that I think
is important to take into consideration here is things like income.
So I have a business, Jess, I don't know if
I want you to take half the revenue from my
business if we break up later down the line, because
you need some kind of alimony. Yeah, and I mean
(14:35):
alimony is not really a word that is used in Australia,
but it is something that people can go for. But
it is really important to realize that essentially a binding
financial agreement is a prenup. So you know how in
America they say we want prenup, we want prene up. Yeah,
but they say that, but theirs is a lot more
(14:56):
sticky than ours is. Ours can be contested in court.
Ours can fall apart. So as much as you know,
we would love for it to absolutely be a hard
and fast you said this, you signed this, this is
what's going to happen. Unfortunately, if someone does want to
contest it, they can, and we've had people in our
community go, well, it's not worth the paper it's written on.
(15:17):
But I'd really like to have that paper to begin with,
to have a starting point for conversation.
Speaker 2 (15:22):
Yeah, okay, that makes a heap of sense. I know
we've turned a little bit doom and gloom, but.
Speaker 3 (15:25):
It's not doom and gloom. This is all about protecting
you and putting you in the best position because you're
not saving up. I would argue it's your entire life savings.
When you're purchasing your first home. You're not saving up
to do that, to have it, you know, all taken
away down the track, and the stats are yes that unfortunately,
fifty percent of marriages end up in divorce here in Australia,
(15:47):
and I have a sneaky suspicion that that is only
going to increase over time, and as much as everybody
enters a relationship with the best of intentions, and you know,
I look at it and I go, you know, Steve
and I have a binding finial agreement. I think it's
a waste of time right now. I love Steve, he
loves me. We both really respect each other. But nobody
(16:08):
goes into a relationship or gets married expecting to get
a divorce, right Yeah. So I have sat down with
Steve at a time that both of us want the
best for each other and said, all right, well, you know,
if this didn't work out, which we think it's going to,
because otherwise I wouldn't be spending so much on a
wedding you had a Joe. But if this doesn't work out,
I want the best for you, and right now is
(16:31):
the best time to sit down and go, well, what
would you get, Jess, and what would I get? And
how would that work? And a binding financial agreement. It's
not just about property. It could be assets. It could
be who pays for the dog that we got together,
who pays for like hats? What does that look like,
how does that work? And how many semantics come into
it is actually up to you, but I would absolutely
recommend going and talking to a family lawyer to set
(16:54):
something up. Or you can google the law society for
your state and they can point you in the right
direction of setting something up properly.
Speaker 2 (17:01):
Okay, incredible already, Like you said, it's not all doom
and gloom. We're just trying to feel good and feel prepared.
So we're going to go to a quick break and
then when we come back, I want to talk about
what we do do if the relationship unfortunately does go
south and you have purchased property together. Don't go any
there already, v We're talking today all about purchasing property
with a partner, which is a very common thing, but
(17:21):
I think sometimes something that we're not all prepared for,
and it can be kind of scary because, like you said,
it's a big commitment. It's arguably a really large percentage
of your money if you're me literally all of your
money that you're.
Speaker 3 (17:34):
Looking at your life savings. Yeah, no one saves up
for a property for years and years to then have
a massive pot of money over to the other side
to be like, oh, don't worry, it's just a property
like this is massive.
Speaker 4 (17:46):
Yeah.
Speaker 2 (17:46):
So I want to talk about what happens if you
have property that you have purchased with a partner and
whatever reason, unfortunately that relationship doesn't work out the season
is over. What are the options when you do own
that property, because it seems like, you know what, if
the market's down, maybe you don't want to sell right now?
What can we do?
Speaker 3 (18:04):
And that's where I'm going to go back to my
buying financial agreement because we want to talk about these things. So, Jess,
this is a conversation that you and I should be
having at the very start of our home buying journey.
Not relationship necessarily, but you and I go, all right,
let's buy a house. Yeah, what is the house for
is it for a residential property that you and I
are going to move into, have our kids, and retire in,
(18:28):
and we are there forever in a day? Is it
a property that we're purchasing because we are in the
circumstance where it's twenty twenty two and we actually can't
afford to buy our dream home. Yet it's a stepping stone.
What does that stepping stone mean? Does that mean that
we're buying that house to wait until it increases in value,
sell and then buy our dream property, or is it
a stepping stone to another property to them buy our
(18:50):
dream property. Or is it a stepping stone where we're
not going to sell it, We're going to lease it
out and then we're going to buy our dream property
with the equity in it. Other outcomes. But the conversation
between two people who are looking to purchase property together
should never be Jess, should we buy a house? Or Nah?
It should be why are we buying a house? Is
(19:10):
it our dream house? You would talk about location and
whether it's north facing, or whether we want open plan kitchen, dining, living,
or how many bedrooms we need? But how long are
we planning on holding this? Okay, the next step there is, then,
well what happens if we break up? Are we going
to go all? Right? Well, the property market is a
little bit shot at the moment. Let's just wait until
(19:32):
it's back and then we'll sell it. Are you happy
to lease that property out? Like Jesse, if you and
I have bought our dream house together and then we
break up and I want to move out because I
don't want to see your little face? Are you moving
out too? If so, are we renting that property out?
Maybe you're not comfortable with that. Maybe you're like, well, no,
I wouldn't ever want to rent that property out. I
would want to stay in it. Okay, Well, in that circumstance,
(19:54):
are you paying more of the mortgage? Are you paying
rent in addition to mortgage repayments? What would that look like?
These are conversations that not a lot of people have. However,
it is quite funny and I did this when Steve
and I purchased our first home together. I was like, okay, cool,
Like what's the plan with it? And he's like, ah,
move in? How exciting? And I was like yeah, like
are we selling it? He's like you just got it?
Speaker 2 (20:15):
Victoria?
Speaker 4 (20:16):
Yeah?
Speaker 3 (20:17):
That like, is this our forever home. Will we sell it,
will we lease it out? And we've both agreed that
we're not entirely sure on what that outcome is At
this point. Our ultimate goal would be to never sell
it because we're in a financial situation hopefully one day
where we can buy a bigger house with the equity
that we've built up in this current house, and we
can lease it out and that becomes something that generates
(20:38):
an income for us. But we've had that conversation whereas
Steve might have said, oh, no, I only actually want
to own one property, so we'd have to sell that
one by another one, and I just want to own shares.
Speaker 2 (20:48):
Yeh.
Speaker 3 (20:48):
Does that make sense? So like, everybody is on a
different journey and everybody wants different things, But the outcome
of that is going to look really different whether you
stay together or not, because what if it's th re
assault and you want nothing to do with that partner anymore,
and you're like, I want to get rid of the house.
I don't care how much money I lose. But in
the process of doing that, you're kind of mucking over
(21:09):
the other person as well, and they're losing equity and
they're losing money. And I think it just really needs
to be discussed. First of AJ's like, what happens if
our relationship doesn't work out? And maybe it is as
clean cut as all right, Well, just would sell the
property if we broke even.
Speaker 2 (21:23):
Yeah, what about buying the other person out? I know
someone who purchased a house with her boyfriend and they
broke up and then you know, it was a little
bit messy, and you know, things weren't happy, and she
didn't want to move because it was prime location or
whatever the case was.
Speaker 3 (21:39):
It can be so messy. Honestly, from my personal perspective,
I prefer to get married and try and get out
of that instead of owner property with somebody else. Like,
the financial implications of property to me, are far more
committed than a marriage.
Speaker 2 (21:53):
Yeah, and it was kind of like I think at
the time, she was like, oh, the capital gains, we're
gonna mess up in comfort whatever it was. I don't
remember the ins and outsally, not that they're really that relevant,
but it ended up being that she brought him out.
But there was like a really short time frame that
she had to do that in She had to scramble
to find the money. So what does that system or process.
Speaker 3 (22:11):
Look like it can look like anything honestly, so it
could be really amicable and Jess, you no longer want
to live in the property with me anymore, and you're like,
can you just buy it out? And we might have
a discussion and you're like, look, I just want my
money back, or you might go, well, we bought this
property in the market's doing really well, so not only
do I want my money out of this, but I
also want market value, in which case we're going to
get a real estate agent in to review the property
(22:33):
and tell me what it's worth, and then you're going
to have to pay the other half of that. You
can go back to the bank and do a mortgage transfer,
which would mean getting rid of you from the name,
and then I carry on the mortgage. But I'm assuming
if you've put a deposit in, you're probably going to
want some cash out as well, so we'd have to
build that in as well. However, I think it's really
important to understand that communication is key here, and as
(22:55):
much as it can be really hard, maybe in your
buying financial agreement or maybe in the conversations you have
before we get to this point. We say, Jess, what
if you and I aren't getting on. Do we just
nominate a third party. It doesn't have to be a friend,
it doesn't have to be a family. It could be
your accountant, where you go to your accountant and say, look,
we just want the best possible outcome for both of us.
(23:16):
Can you let us know what that is? And you
pay for that quote advice and make sure that somebody
else is calling those shots. Financial advisor can do that
as well. However, it is really important to communicate and
then when it comes to the actual loan structure, communicate
with your lender, because your lender is very likely to
have a level of flexibility where they're like, all right,
(23:37):
no problems, we might pause some payments for this period
of time and then pick them up here. Or maybe
they have some considerations that they can make to put
you in the best possible position to make it happen.
Like if you need to get out of the mortgage
but you're on a fixed term, maybe they waive some
fees for you. I would argue that in these circumstances,
communication in every aspect is key, but most of us
(24:00):
just want to bury our heads in the end.
Speaker 2 (24:01):
Yeah, let's say you were both living in it, and
it wasn't originally intended as an investment property. That you
break up and you know you don't want to sell
the house because you worked really hard to get it.
Maybe the markets down you're not going to get you
value back off. For whatever reason, it doesn't seem like
the choice you want to make. Can you rent that
property out even though you guys aren't together.
Speaker 3 (24:19):
Yes, of course you can. You just own the property together,
like you still have joint ownership of that property. And
if the circumstances were different and you had, you know,
tendency in common and owned different percentages, you'd still just
go to the real estate agent and be like, hey,
we want to lease this property out. Go through that
property process, and then you'd probably just split the rent differently.
Speaker 2 (24:40):
And so depending on I guess, you know, if the
rent was covering the mortgage, then presumably we'd all just
go to the mortgage. And if you're making profit, then
if you had tenants in common, I assume you'd get
your splits. If I had paid seventy and you'd paid thirty.
Speaker 3 (24:52):
Exactly exactly, and you can actually organize all of that
through your real estate agent. So if you maybe are
a little bit when it comes to a break up
and you I don't really want to have to deal
with my exgess every single week. When it comes to
the rent coming in, you can actually say, hey, real
estate agent, you take your cutout, because the real estate
agent will obviously charge for their services. And then when
(25:14):
you pay us to the rent, can you put seventy
percent into just as account, thirty percent into mine called wambam,
thank you ma'am. And then when it comes to tax time,
I would declare my thirty, you would declare your seventy.
But we do need to take into consideration the property
value as well. But yes, it can be split that way.
And most real estate agents are relatively flexible because they
don't care. They just pop down your account number and
BESB and pay it on automation each and every single month.
Speaker 2 (25:36):
Yeah, okay, last thing I want to ask you about
is if the breakup goes really south, which real salty,
Real salty.
Speaker 3 (25:44):
We've seen it happen.
Speaker 2 (25:45):
We have seen it happen. And you know, sometimes people,
I think, when they're going through a hard time, they
tend to react out of emotion, which is often like
anger or pain, which means that you're maybe not thinking
super logically. What can people do if? Great therapy very helpful,
but what can people do if they go through a
breakup like this and their partner dips out? So if
(26:06):
we have a more each together and you're like screw you,
I hate you, I never want to see you again
and you leave the country, am I stuck with everything?
What resources can I call on?
Speaker 3 (26:15):
Who you can in touch with really depends if you
are tenants in common or you have joint tenancy, because
if you joint tenancy, it was on the both of
you both signed on the dotted line. And if they
can't get in contact with Victoria, they're gonna call, yes,
aren't they? Whereas it if it's different and the split
is different, like, there are definitely different avenues you can
go down. First person, I would call as my family
lawyer and be like, this is the circumstances. What do
(26:36):
I do? How do I chase this? And then there
are bypass laws, so like if they're not doing this,
then they're not doing that. There are definitely things that
you know legally can be done because it's actually enforceable,
Like it's not hey, oh Jess isn't paying well? With me,
it's like, well, actually, you might end up defaulting on
the loan. You might end up in a really significant
financial hole. You might end up with a really bad
(26:58):
credit rating because your partner hasn't been paying and you
just don't have the cash to cover it. Again, it
comes back to communication first with your family lawyer, second
with the bank yep.
Speaker 2 (27:07):
And ultimately when you enter into that homeland, that's a
legal contract, right, So yes, if their name is on
there legally in some way, shape or form, they are responsible.
And I would assume that there would be avenues of
the law that hopefully can protect you. But that's what
your family lawyer could have done.
Speaker 3 (27:22):
Exactly, And it's not something that I can say on
this podcast because it's different for absolutely every circumstance. But
that's why I'm like, look, get a family lawyer, and
if you don't have one, Lucy Percy from Heads and
Heart estate planning is definitely going to be my first
port of call. Because even if she's like, look, I
can't really help, but here's the information, Well, here's the
right contact for you, I would go down that, but
(27:42):
you definitely can take it much further.
Speaker 2 (27:44):
Amazing A bit of a scary one today, but thank
you for me a bit salty, a little bit easier,
a little bit more digestible. But I think that's about
all we have time for today. Just before we head off,
let's quickly wrap the boring but important stuff. The advice
shed on the Property Playbook is generally in nature and
does not consider your individual circumstances. The Property Playbook exists
purely for educational purposes and should not be relied upon
(28:05):
to make an investment or a financial decision. We would
love it if you guys would join our Facebook group.
Our community shares property questions, tips and tricks every single day.
You can search the Property Playbook on Facebook to find us.
You can also find us over on Instagram at Property
Playbook Aus kicking around sharing fun and interesting things. And
if you're feeling generous, maybe leave us a review. Tell
(28:26):
me I'm doing a good job. I'm really trying.
Speaker 3 (28:28):
Yeah, don't see mean things about Jess. It makes her
really sad. Don't do that, it really does.
Speaker 2 (28:32):
But that's about all. I'll see you in the next episode, guys,
See you bye.
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