The cost of living is at its peak, not only in Kenya but also in other countries worldwide. As a result, getting money for survival has been challenging, leave alone investing in real estate.
However, that should not discourage you because life has to move on anyway, with new survival tactics.
You can get a friend or a relative and engage in joint tenancy, where you'll contribute towards property ownership.
By the end of this post, you should:
Understand joint tenancy meaning
How joint tenancy works
Know the benefits of joint tenancy
Why you may have to avoid joint tenancy
So,
What is Joint Tenancy?
Don't confuse joint tenancy with being a tenant. Being a tenant means you don't own the property and can only rent it. A tenant can move from one property to another without restrictions.
On the other hand, joint tenancy is a property ownership criterion involving two or more people contributing equally to buying property.
When you are ready to form a joint tenancy, you can hire a real estate attorney who will take you through all legal aspects.
You can co-own a home with a spouse, friend, or relative with whom you have equal responsibilities in the house.
In addition, you can also co-own a commercial property where you will equally share the profits and any other maintenance costs involved.
How Joint Tenancy Works
Each member will contribute 50% of the final property cost if you are two members. In addition, all your names will appear on the property ownership documents.
What if you both don't have funds? Can you take a mortgage together? Well, to get a mortgage loan to invest in real estate, you both need a higher credit score, say above 650.
However, if the income of the joint tenants is high when combined, there is a good chance of the lender approving their loan.
In addition, if all members have excellent credit scores, they will get a better loan deal with lower interest rates. So it will be a good idea for each member to improve their credit score before applying.
If both of you can qualify for a mortgage loan, you can apply for a mortgage together when you have a high score and a higher income level.
Every member will contribute an equal amount of all costs involved during the joint mortgage loan application. In addition, the lender divides the instalments among the members so that each one pays equally.
What if one member dies or fails to repay his share of the mortgage due to job loss or something similar?
Well, if a co-tenant dies, their share of ownership goes to the other co-tenant. If more than one co-tenant remains, they will have to restructure their ownership to have equal shares. If unwilling to share equally, they may have to reform it to tenancy in common. Tenancy in common allows members to have different claims of property ownership.
The same criterion applies if one tenant wants to sell their property share.
If one co-tenant dies, the remaining co-tenants take full responsibility for the mortgage and the property. The deceased beneficiaries have nothing to do with the joint tenancy property. They can only benefit from the dead person’s other properties.
This aspect of property transfers is known as Joint tenancy with rights of survivorship.
The Benefits of Joint Tenancy
You only need to have a percentage of the total cost of the property.
We all know how buying real estate can be expensive, an amount you'll need decades to clear your mortgage.
However, when you agree on a joint tenancy, you may not even take a loan if you have a huge amount of savings.
You will share the downpayment that the real estate buyer requests.
If you take a mortgage, you don't pay it solely.
When you take a mortgage to invest in joint tenancy, all co-tenants will have an equal share of installments to repay the mortgage.
Furthermore, it will take a shorter period to repay the mortgage since you are sharing.
When one co-tenant dies, his share belongs to the remaining co-tenants.
This scenario is only advantageous to the remaining co-tenant since the deceased beneficiaries have nothing to rejoice at. However, if the remaining co-tenants are compassionate, they can reward the deceased family with a one-time compensation, but it's not compulsory.
The mortgage loan is paid, even when one member dies.
The deceased family members won't be left with a mortgage loan to repay if their loved one dies. Instead, the remaining co-tenants will take care of it without involving the family.
Disadvantages of Joint Tenancy
When you die your family is left with nothing.
With the rights of survivorship, other co-tenants have the right to own all your shares since there is no need for probation.
Added responsibility.
If one co-tenant dies, the remaining members have the responsibility to repay the mortgage loan.
The same applies when one member loses their job. In addition, the remaining co-tenants will also have to foot all property maintenance costs.
Relationship may end.
You all know what happens when a good relationship turns sour. It will be so tough to co-own property with someone you don't talk with. The only possible solution will be selling the property, which won't happen so fast.
Conclusion
Joint tenancy is a good investment plan, especially if you are working with a close friend or relative. The good thing is that you won't need lots of money to be a real estate investor.
Frequently Asked Questions
When do I need joint tenancy?
You will need this investment when you have less money, but you have someone whom you can share and co-own the property with.
What happens when one member wants to leave a joint tenancy?
The member has to give written notice to the other members. Then they should agree on terms and conditions involved.
Can a couple have a joint tenancy?
Yes. If they agree, they can engage in joint tenancy ownership. In case of divorce, they will equally divide the property, with help of an attorney of course.
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