Shared ownership explained: Pros, cons and how it works

Shared Home Ownership in Turkey: A More Accessible Path to Property Ownership with Colux

In Turkey, the average home price in 2024 is approximately 5.2 million Turkish Liras, reflecting a 25% increase compared to last year. For first-time buyers or those without significant equity, this can be an overwhelming obstacle — and shared home ownership might be the solution. This approach allows you to co-own a primary or secondary home, making ownership more accessible with a lower initial investment. However, before diving in, it’s essential to weigh the pros and cons. Let’s explore how shared ownership works, its benefits, and potential drawbacks to determine if it’s the right path for you.

What is Shared Ownership?

Shared ownership is a type of homeownership where you co-own a property with one or more individuals. Expenses and equity are divided among the co-owners based on the agreed-upon shares.

How Shared Ownership Works

In shared ownership, the property’s value is divided into shares, with each share representing a specific percentage or fraction of the home. Co-owners can agree on these percentages based on several factors, such as:

Primary Residences: The square footage each co-owner will occupy
Second Homes: The amount of time each co-owner will spend in the vacation home
Investment Properties: The amount of money each co-owner is willing to invest
Some programs allow co-owners to gradually increase their ownership percentage over time, a process known as "staircasing." This option gives co-owners more control and potential for equity growth.

The type of shared ownership that’s best for you depends on your financial goals, situation, and desired structure with your co-owners. Always consult with a legal expert to discuss your options.

Types of Shared Ownership Structures

Joint Tenancy: All co-owners hold the title to the property. If one co-owner passes away, their share automatically transfers to the surviving co-owners. However, the downside is that you cannot choose who inherits your share if something happens to you.
Tenancy in Common: Each co-owner holds a deed for a percentage of the property, and shares may not be equally split. You can sell your share without needing consent from the other co-owners, but if a co-owner sells their share or passes away, you might end up sharing ownership with an unfamiliar person.
Limited Liability Company (LLC): When you form a multi-member LLC with other co-owners, the LLC holds the property title. This can limit personal financial liability and is often used for investment purposes. Some companies, like Colux, use LLCs to facilitate second home ownership with reduced financial risk.
Pros of Shared Ownership

Shared ownership provides a unique way into property ownership, particularly for those facing financial hurdles with traditional home buying. Here's a breakdown of key advantages:

Lower Upfront Cost: The down payment and overall price of the home are much lower than buying a property outright, making homeownership more accessible.
Shared Expenses and Responsibilities: Maintenance, utilities, repairs, and other costs are divided among co-owners, reducing the financial and workload burden.
Faster Path to Homeownership: Shared ownership allows individuals to enter the property market with a smaller initial investment compared to traditional mortgages.
Potential for Equity Growth: As the value of the property increases, so does your share, allowing you to build equity over time.
Vacation Home Accessibility: Shared ownership can also make second home ownership more attainable, as the cost and usage are divided.
While these benefits make shared ownership appealing, it’s essential to consider your financial situation, risk tolerance, and long-term objectives carefully.

Cons of Shared Ownership

Although shared ownership has clear advantages, it’s important to consider the potential downsides before making a decision:

Limited Control: Major decisions about property changes or renovations must be made jointly with co-owners, which can lead to delays or disagreements.
Finding Compatible Co-Owners: It’s crucial to find co-owners who are aligned with your financial goals and lifestyle to ensure a smooth experience.
Exit Strategy Challenges: Selling or exiting a shared ownership arrangement may be more complicated than selling a traditional property.
Rent Payments on Owned Shares: You may still need to pay rent on the portion of the property you don’t own, in addition to the mortgage payments.

Why Try Shared Ownership?

There are many reasons people choose to co-own a property, whether it’s a primary home or a vacation property. Here are some common motivations for opting for shared ownership:

Reduce the Purchase Price: By sharing ownership, the financial burden is split between co-owners, making it easier to afford a property. Lenders will consider the combined incomes, credit scores, and debt-to-income ratios of all applicants, which can make it easier to secure financing.
Make a Purchase Possible with Poor Credit: If one party has poor credit, they might provide the down payment while others with better credit hold the mortgage. Over time, they may also increase their ownership share as they contribute to the mortgage payments.
Relieve Financial Pressure on an Existing Property: Those who are financially struggling but have owned a property for some time may invite others to share ownership, relieving financial strain by sharing mortgage payments or maintenance costs.
Achieve Vacation Home Ownership: Owning a second home can be challenging due to high costs, but shared ownership makes it more accessible by splitting the purchase and upkeep costs with others.

Shared Ownership with Colux: The Smart Way Forward

Shared ownership offers a unique way to enter the real estate market in Turkey, whether you’re looking for a primary residence or a second home. However, it’s not suitable for everyone. Assessing your financial situation, risk tolerance, and long-term goals is crucial to making the right decision. If you value flexibility and affordability — and are comfortable with shared responsibility — shared ownership might be the gateway to homeownership.

Shared Ownership FAQ

1. Can I purchase any property on a shared ownership basis?
No, not all properties are available for shared ownership. You need to confirm eligibility before proceeding.

2. Is shared ownership better than renting?
It depends. Shared ownership offers potential for equity growth, but you'll have ongoing costs like mortgage payments. Renting offers flexibility without equity growth.

3. What are the eligibility rules for shared ownership?
Eligibility often considers income, household size, and the ability to afford mortgage payments and ongoing costs.

4. Is shared ownership risky?
Like any major financial decision, there are risks, but the financial responsibilities are shared, which can reduce individual risk.