Pros and cons of investing in property with friends

Buying a property with friends has become a realistic option for many New Zealanders who find purchasing alone increasingly difficult. By pooling savings and sharing costs, groups can gain access to property that may otherwise be out of reach.

However, shared ownership also introduces complexity, shared risk, and legal obligations that need to be understood upfront. Reviewing both the advantages and disadvantages is essential before deciding to invest together. For a broader overview of ownership structures, see our guide to shared property ownership in New Zealand.

The pros of investing in property with friends

Here are the key advantages that make buying a property with friends an appealing path for many New Zealanders.

Lower upfront costs and shared deposits

Combining deposits makes it easier to reach the minimum requirements most lenders expect. According to the Reserve Bank of New Zealand and multiple major bank mortgage guides (e.g. ANZ, BNZ), a 20% deposit is standard for owner-occupied lending, although exceptions exist under LVR (Loan-to-Value Ratio) rules for some low-deposit loans.

Joint borrowing is explicitly encouraged in financial literacy resources as a way to pool resources to meet deposit thresholds.

Reduced financial pressure

Shared ownership is a practical method to reduce financial exposure. NZ law permits shared ownership through co-ownership agreements, and agencies. This helps create a more stable and predictable cash flow for everyone involved.

Stronger borrowing power

NZ banks do allow group or joint applications and assess total combined income and liabilities. In some cases, this allows access to properties or locations that would not be feasible for a single borrower.

Lenders still consider group stability and legal structure, so clear documentation remains important.

Access to better properties and locations

Group investment enables access to higher-quality properties due to shared capital and risk. In urban centres like Auckland or Wellington, average property prices are prohibitive for single buyers but feasible for small investment groups or co-ownership models.

Combined skills and shared workload

Different members may contribute research, budgeting, renovation oversight, or property management skills. When roles are defined clearly, this can support better decision-making over time.

The cons of investing with friends

Investing in real estate with friends can work well, but it also comes with risks that every group should understand before they commit.

Shared liability with the bank

This is a standard legal arrangement in New Zealand. Under joint and several liability, each borrower is responsible for the entire debt, not just their portion. If one defaults, the bank may pursue any or all co-borrowers. This can put pressure on the group if someone’s income or financial stability changes.

More complex decision-making

The Responsible Lending Code (2024) from MBIE outlines expectations for transparency and shared responsibility in lending arrangements. It explicitly advises lenders to consider group borrowers’ ability to handle disputes, roles, and risk exposure. Groups must agree on decisions such as renovations, tenants, rent changes, or when to sell. Without a clear process, disagreements can delay action or create conflict.

Multiple sources including community housing projects and legal commentaries show that larger ownership groups often require formal decision rules to avoid conflicts or delays.

Risk of personal relationship strain

Money can create tension when expectations or personal situations change. Friends may have different views on tenants, maintenance, renovation budgets or long-term goals. A written agreement reduces conflict, but it cannot remove the emotional pressure if priorities shift.

Studies note that financial disagreements between friends are among the top reasons for failed co-ownership.

Harder to exit the investment

Leaving a shared property is more complex than selling a home owned by one or two people. This reflects standard legal and financial practice in NZ. Exiting a co-owned property typically requires the other owners to buy out the share, often involving refinancing, valuations, and legal documentation.

The New Zealand Law Society highlights that co-ownership arrangements should include exit clauses, but stress that complications and delays are common without them.

Tax and legal complications

The Inland Revenue Department (IRD) confirms that the bright-line test applies to residential properties sold within a set timeframe (10 years for most). All co-owners are liable for tax, regardless of individual intent, if the sale is taxable.

Changes to ownership structure or share transfers may also trigger legal costs or unintended tax consequences if not planned carefully.

Ready to explore your options?

Investing in property with friends can reduce barriers to entry, but it requires greater planning and clearer documentation than buying alone. Success depends on aligned expectations, appropriate ownership structures, and well-defined exit arrangements.

Most groups benefit from legal and financial advice to confirm obligations and manage risk before committing.

If you want guidance on how investing with friends could be structured in your situation, the team at Staircase can help you review your options before you decide. You can book a free consultation with us Staircase today. 

Legal disclaimer: This article provides general information only and does not replace personalised legal or financial advice.

FAQs about investing with friends

Can our group still qualify for first-home buyer benefits?

Yes. Each person is assessed individually for KiwiSaver withdrawals and First Home Grants, even when buying together.

Do all group members need to be on the property title?

No. Some groups use a company or trust where individuals hold shares instead of being listed on the title.

Can we rent the property to one of the group members?

Yes, but you need a written agreement covering rent, maintenance, and responsibilities to avoid conflicts later.

Is it harder to get insurance for a shared property?

Not usually. Insurers mainly want clarity on occupancy, use, and ownership, but the process is similar to standard cover.