Millennial advisors weigh in on new trend to combat affordability, explain how they caution clients to avoid pitfalls
Canada’s housing affordability crisis has reached the point where younger Canadians are teaming up, pooling resources, and purchasing homes together. A survey by Royal LePage recently found that 6% of homeowners in Canada already co-own a property with someone other than their spouse. One quarter of realtors surveyed said they’ve seen an increase in co-purchasing business from groups of Canadians.
Curtis Holt-Robinson and Tara Lalehparvar aren’t surprised by the survey results. The co-founders of Skyward Financial specialize in serving millennial and gen Z clients, they’ve already seen several clients come to them with plans to co-purchase a home. Those clients have largely partnered with family members, siblings and parents, but they’re keenly aware of groups of friends so desperate to get on the property ladder that they’ll go in on a place together.
“The survey is not at all surprising to us, it checks out with the financial situations and prospects of our younger clients,” Lalehparvar says. “As our clients break into the workforce, make money and save they say that [homeownership] is something they want for their future. But the reality is, it’s going to be over a million dollars, and you’re going to have to qualify for that.
“I won’t be surprised if we see more clients in the future saying ‘if my parents can’t help me out, if I don’t have siblings to go in with, I’ll call up my best friend and see if they’re willing to commit to this.”
Holt-Robinson added that as rates have ticked up and the size of a down payment has become a greater factor in housing affordability, he’s seen more clients come to him about co-purchasing. When that happens he and Lalehparvar try to make sure their clients understand the long-term implications of this kind of purchase. The pressure to own a home is so acute on many young people, that they don’t look far beyond the actual act of purchasing.
As advisors, Holt-Robinson and Lalehparvar try to refocus their clients on the long-term. They outline monthly mortgage costs, tax plans, and their clients’ current cashflow situation.
“Cashflow is super important,” Holt-Robinson says, “we have to ask our clients ‘if you’re paying a $3,000 monthly mortgage, can you afford to put food on the table?’”
Co-purchasing adds a whole new range of complexities and risks to the property picture. Lalehparvar says that advisors should try to ensure they’re working with both purchasing parties. With everyone in the room together, an advisor can ensure that every purchaser has the same goals and plans for the property.
For example, if one buyer sees the property as a 5-year investment, and the other is taking a 15-20-year time horizon, then a conflict is almost inevitable. Or if the property skyrockets in value, both parties need to be clear on what they would want to do with any potential windfall. Working with a good lawyer early in this process can be key. The potential for conflict in both the short and long-term is such that a clearly written contract and fulsome understanding of responsibilities is crucial to any potential co-purchase.
“If their objectives don’t align, then these co-purchasers are almost certainly going to run into problems,” Lalehparvar says. “One person might want to sell in 10 years, and the other wants to hold on and stay in the market. It goes beyond that, though, if you know that one purchaser is going to move away in 10 years or change careers, that needs to be considered.
“Their financial prospects and situations for the next however many years need to align, or at least complement each other, otherwise you’re sure to run into conflict, and then you’ll need to call a lawyer.”
