Is Buying a Home With a Friend a Good Idea?

Is Buying a Home With a Friend a Good Idea?

Buying a home with a friend or siblings can make home ownership more affordable since the down payment, mortgage payment and costs for upkeep can be shared between two or more people. Affordability is really the  top reason people buy with others as it's more affordable than purchasing a home on their own.

While money is a significant concern, co-buying agreements should take into account more than money. Good friends are precious and rare. Buying a home with one could mean losing that friend if things go bad and you can’t work things out.  It is not unlike a marriage.

Buying with a friend isn’t for everyone. The steps involved in buying a home with a friend — or even a group of friends — are the same as buying alone or with a partner. However, buying with a friend requires extra planning to ensure accountability and provide protection in case plans change.

It’s always a good idea to consult with an attorney before making such a large financial commitment with another person. And, as always,working with a good agent can help you navigate this process.

What to think about before buying a home with a friend

Think about how you want to live. Do you want a separate unit, a division of the home, or something along the lines of a duplex? A duplex could be helpful if one of the owners decides to sell or move out. Separate units may also allow for rental income outside a roommate or co-buyer situation if one friend decides to sell their portion or move out. 

There should be no secrets when it comes to financial details with your co-buyer.

Make sure you’re comfortable sharing important financial details with your co-buyer. You and your friend will both have to qualify for financing and if either of you has a low credit score you might not qualify for a mortgage. If your friend is suddenly unable to pay their share of the mortgage and costs, that also would have a huge impact on your finances, as you would be responsible for the entire cost.

Questions to ask before you buy a home with a friend:

What are the legal arrangements when buying a home with a friend? 

You should speak to a legal and tax professional for more information and to decide what options might exist in your what would work best for you.

How much is each person putting down on the purchase, and how will you split the closing costs?

It’s important to clearly document how you plan to handle the costs. It also takes money to maintain and improve a home. How are you going to plan for expenses? What about utilities?

How will disputes be resolved and what if one wants to move out?

Loss of a job. An opportunity in a different city. A new love in your life. You may find at some point that your home no longer fits into your plans — or your friend’s. Do you have the option to buy the friend out? Can you afford to refinance it or does the home go up for sale? If a buyout is possible, how is the price determined? Things happen. It's good to have a plan just in case.

Ask yourself: How well do you know your friend and how well do you get along?

Can you work through disagreements in a respectful and fair way? Do you share similar lifestyles and habits, or will you have to spell out even ordinary things such as laundry days? 

Should you have a legal agreement drawn up by a lawyer? 

Can your friendship withstand the stress test?

Buying with a friend or a relative may not work for everyone but something to think about.  If you want to explore this option I'd be happy to chat and see if it might be right for you.