Buying real estate in Canada has become increasingly challenging as home prices continue to rise. For many aspiring homeowners and investors, the dream of entering the property market feels out of reach when relying on a single income or savings plan. One practical solution is partnering with a friend or trusted individual to purchase property together.
Here’s the key insight: investing in real estate with a partner allows you to share costs, strengthen your mortgage application, and enter the market faster, but success depends on following clear steps and setting expectations from the start.
This guide explains why partnerships can be effective, the step-by-step process to make it work, and the benefits and risks to consider along the way.
Why Consider Investing with a Mortgage Partner?
Pooling resources with another person can transform your ability to buy property.
- Shared Financial Burden: Splitting the down payment, mortgage payments, property taxes, and maintenance costs makes ownership more accessible. For example, a $100,000 down payment becomes manageable when two people contribute $50,000 each.
- Improved Qualification Chances: Lenders evaluate joint applicants by looking at combined income and debt ratios. If one partner has strong credit and the other contributes steady income, the partnership may strengthen approval chances.
- Faster Wealth Building: Entering the market earlier allows you to benefit from equity growth, rental income, or property appreciation sooner than waiting to save enough individually.
Steps to Invest in Real Estate with a Partner
Investing with a partner is more than simply signing a mortgage together. The following steps ensure the process is smooth and fair for both parties.
Step 1: Choose the Right Partner
This is the foundation of any successful investment. Your partner should be someone you trust, ideally with financial stability and aligned goals. Consider their credit score, employment reliability, and long-term outlook. For example, if you’re planning to hold the property for ten years, but your partner only wants a short-term investment, conflicts may arise later.
Step 2: Define Your Investment Goals
Before signing anything, discuss your vision for the property. Are you buying a primary residence, a rental property, or a long-term investment to sell later? Aligning on the purpose ensures both parties make decisions with a shared goal in mind. If one partner expects rental income while the other expects quick resale, misunderstandings can disrupt the partnership.
Step 3: Draft a Co-Ownership Agreement
A written, legally binding co-ownership agreement protects both partners. It should clearly outline:
- Ownership percentages.
- Financial responsibilities (mortgage payments, taxes, maintenance).
- What happens if one partner cannot pay.
- Exit strategies if one partner wants to sell early.
By having a lawyer draft this agreement, you reduce the risk of disputes and protect your financial investment.
Step 4: Clarify Financial Contributions
Transparency is essential. Decide who will contribute to the down payment, ongoing mortgage installments, and property-related expenses. Keep detailed records of contributions to avoid disagreements in the future. For example, one partner may cover a larger portion of the down payment in exchange for a higher ownership percentage, while the other takes on more responsibility for ongoing costs.
Step 5: Apply for a Joint Mortgage
When applying for financing, lenders evaluate the combined profile of both applicants. They will look at:
- Credit scores of each partner.
- Employment history and income stability.
- Debt-to-income ratio as a joint measure.
Documentation such as tax returns, pay stubs, and bank statements will be required from both applicants. Having a clear financial history makes the process smoother.
Step 6: Decide on Ownership Structure
In Canada, co-owners typically choose between:
- Joint Tenancy: Both partners own the property equally, and ownership automatically transfers to the surviving partner if one passes away.
- Tenancy-in-Common: Each partner owns a specified percentage, which can be passed to heirs or sold separately.
Your choice depends on whether you’re investing as business partners, friends, or family members.
Step 7: Manage the Property Together
Ownership is not just about financing; it also involves managing the property. Decide early how responsibilities will be divided, such as:
- Handling tenant communications (if it’s a rental).
- Overseeing repairs and maintenance.
- Managing finances and tracking expenses.
Regular check-ins help ensure both partners remain aligned and the property is managed effectively.
Benefits and Risks of Partnering on Real Estate
Like any investment, co-ownership comes with advantages and risks.
- Benefits: Shared costs, stronger mortgage approval chances, earlier market entry, and shared responsibility for property management.
- Risks: Potential disagreements, unequal financial contributions, or one partner facing unexpected financial hardship.
The best way to mitigate risks is by creating a strong co-ownership agreement, maintaining open communication, and working with an experienced mortgage professional.
FAQs
Can I buy real estate with a friend if my credit is lower?
Yes, but your partner’s stronger credit may carry more weight in the mortgage approval. This could mean higher responsibility for them, so it’s important to discuss and document expectations.
What happens if one partner wants to sell early?
This is one of the most common challenges. A co-ownership agreement should outline exit strategies, such as one partner buying out the other’s share or selling the property together.
Do both partners need to live in the property?
Not necessarily. Many partnerships are formed specifically to purchase rental properties or income-generating assets where neither partner lives in the home.
Conclusion
Investing in real estate with a partner or friend can be a smart and practical way to enter the property market, especially in today’s competitive Canadian housing landscape. With clear agreements, open communication, and well-defined roles, partnerships can reduce costs, increase buying power, and build wealth faster.
At Pradip Maheshvari, we guide clients through the process of structuring joint mortgages, preparing co-ownership agreements, and ensuring both partners are protected throughout the investment journey. If you’re considering purchasing property with a partner, contact us today to explore your best options and move forward with confidence.
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