Buying your first home in Auckland ain’t easy.
It can feel like it will take a lifetime to come up with a 20% deposit – a massive $120,000 for a home worth $600,000. That’s a ton of hours slogging it at the office.
You’ve no doubt asked yourself what you could do to fast track the process and buy your first home sooner.
Here’s an idea you would’ve heard before but possibly dismissed as undesirable, unrealistic or too complicated: Buying your first home with a trusted friend or family member.
Before you click away, have you ever really considered how it could work for you?
Let’s take a look at the advantages, disadvantages and a solution that might just work for you.
First up, this is how it worked for my friends Lisa & Ryan:
Despite searching for a family home for almost a year, Lisa & Ryan hadn’t been able to find a property which fit their criteria and tight budget constraints.
Lisa’s sister had bought her first home a few years earlier was looking to buy her first investment property.
The three of them got together and sussed out a plan. They pooled their deposits, applied for a finance approval and went on to buy a property which is now home to Lisa & Ryan (and their little one).
My friends got their home and Lisa’s sister got a share in an investment property (with excellent tenants!) Win and win.
Advantages of a home buying collaboration
- Buy your first home sooner
- Buy a superior home in a better location
- Share mortgage repayments, expenses and utilities
Disadvantages of a home buying collaboration
- You won’t have full control or ownership of home
- Friendship and money don’t always mix well
- You’ll be jointly and severally liable for the debt
- Can be trickier if you want to buy an investment property later on
Could a collaboration work for you?
Wondering how you’d figure out all of the details like what to do if there’s a problem, if the relationship breaks down or someone wants out?
A Property Sharing Agreement drafted by a lawyer is the answer.
A Property Sharing Agreement is a contract that outlines the rights and obligations of multiple owners of a property. A lawyer will have a standard template that can help you started.
Before approaching a lawyer, the parties involved should get together and map out all possible scenarios as well as a contingency plan for how to manage any situations that might arise.
Everyone involved will need to get their own independent legal advice.
Is a home buying collaboration a good idea?
Let’s be honest, it’s not a perfect solution. But if you can get the right person on board and sort out a Sharing Agreement, it can be a great way to buy your first home sooner than you would otherwise have been able to do.
Next steps:
Who could you approach about a home buying collaboration?
The first point of contact could be sharing this post with them!
Looking for more?
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