Interesting one - Should i invest as a co owner to help buy my friends primary home

[Toby Fellows]

My good friend went through a messy divorce which hit him hard financially. He wants to get back on the property ladder and we have talked about me putting in 50% of the deposit needed to purchase a house. He has a good job but no savings built up. We have agreed i would be on the deed but not the mortgage. 

We discussed that in 2 years he would either sell, Rent it out ( and we co own the rental)  or buy me out of my share at present market value.  

Pro's as i see it. I am investing in real estate without the need to put in 20%+ deposit, He pays the monthly mortgage which im not liable for, I benefit from appreciation.. I am very handy so would do any upgrades and he would pay for materials. If he sells he wouldnt be subject to capital gains?

Cons', My money is sat in this house which i cant use for any other personal investments. He would need to add me to the deed post purchase. If he changes his mind about selling / buying me out i am stuck owning half a house. 

Is this a good idea & am i missing anything? Thanks

[Bryan Martin]

This sounds like a thoughtful plan, but there are a few things to keep in mind.

First, while you won’t be on the mortgage, you'll still be co-owner, meaning if things go south (like he defaults), the bank could come after the property, which affects your investment. Also, depending on how much the house appreciates, there could be capital gains tax when you sell. Just because it's a primary residence for him doesn't automatically exempt your portion from capital gains—you're still considered an investor.

You also need to think about what happens if your friend can’t buy you out or if your relationship changes. Owning a house together is like a long-term business partnership, so make sure you have a clear exit strategy in writing. Maybe think about a legal agreement outlining all these “what ifs.”

Overall, it’s not a terrible idea (not something I would likely do as it could go sideways though), especially if you’re confident in the property’s potential. Just make sure you protect yourself legally, so you don’t end up with half a house you can’t do much with.