What to Consider When Purchasing Real Estate with a Friend
Posted by Niels Madsen on
In this day and age, owning property can feel like an impossible goal. On top of the down payment for your new home, you’ll have to consider the cost of the mortgage, maintenance, repairs, and more mundane things like decorating and finding the furniture you love.
When you ask the questions, the answers might lead you to consider making your real-estate purchase with a friend, relative, or someone else who’s in the same situation as you.
But how do you go about buying a property with someone else? As a co-owner, how do you protect your investment? What do you need to consider when drawing up a co-ownership arrangement?
Read on to learn the answers to these questions and why you may want to consider an arrangement like this.
Establish a Clear Relationship with Your Co-Owner
This could be a difficult or awkward conversation but it’s an important one to get out of the way early. There are a lot of different kinds of relationships that result in the circumstances to buy a house together.
This could be a family member, a good friend, or even someone you met on a website meant for matching real-estate buyers.
Sit down together and discuss:
- How you both like to live. What will you be sharing while you live on the property?
- Rules you’ll both follow in common spaces
- Separation of food storage and kitchen items
- Quiet times and quiet areas in the home
- Rules for pets, children, visiting family, and significant others
- Respecting each other’s personal space
- Yard work and maintenance
- Cleaning tasks
- How you’ll handle repairs
- Financial and Logistical Concerns
Once you’ve discussed your personal relationship with your co-owner, you’ll have to get into the discussion of money.
There are many financial and logistical things to consider such as:
- Your credit scores and any delinquencies
- How you’ll pay a mortgage together
- The down payment for your property
- Your budget
- What you’ll do if one of you decides to move and the other doesn’t want to
- What will happen to the property if one of you dies
- What happens if one or both of you loses income and can’t pay their share
At this time, before any real decisions are made, it’s a good idea to retain legal counsel and bring these discussions to them. Keep the agreement professional and if you have any issues in the discussion that appear to cause discourse, write them down. Depending on your relationship with your co-owner, you can also choose to seek legal counsel together.
What Kind of Property Will You Purchase?
The concept of “let’s buy a house together” is a little more complicated than just making a purchase.
In addition to everything already mentioned, there are different ways you can buy a home with a friend, family member, or even a stranger. Each situation has different types of properties that are allowed and different loans that qualify.
Talk to your realtor about this before you begin searching for a property. Be sure they know what the situation is and what you’ve discussed with your legal counsel.
As Co-Owners, Consider The Work Involved
When you’re a single person or family purchasing a home, you think about things like the HVAC system, how the home is powered, and what kinds of remodeling you may want to do. With a co-owner you have to discuss what you’re willing to accept in a property and how the work will be split and paid for.
As co-owners, there may be more than just maintenance involved with the home you fall in love with and that could change your timeline and budget. If you have to gut the entire kitchen or demolish the existing structure to start from scratch, there’s another person involved in that decision you need to consider.
Decide How to Handle Social Situations
If your co-owner is a close friend or family member, this probably won’t be much of an issue. If your co-owner is someone you’ve met more recently or don’t have a close relationship with, there will be some questions among your friends and family. Consider things such as:
- Where are the common entertainment areas in the home?
- What will you do if your co-owner has guests?
- What will you do if your co-owner has children?
- What will you do if your co-owner wants to have a roommate in their part of the home?
Owning property is a long term commitment. Things can change in your life or the life of your co-owner within the time you own the property together. It’s important to establish how you’ll handle these things so that your relationship as co-owners remains healthy throughout the duration of ownership.
Have Some Fun With It!
Once you get all the logistics handled, you’re ready to find a home you love. The beauty of buying with a co-owner is that you’ll be able to purchase something you wouldn’t be able to afford on your own. You’ll get to own property and you’ll learn a lot about partnerships within the process.
While there might be a lot to think about when making this decision, there is some fun to be had with it too.
First and foremost, you’re buying a house! This is the dream of many people and, with your co-owner, you get to have that. This means investment, equity, and security for your living situation. You’ll have a space to make all your own. Enjoy that.
To get the process started, whether on your own or with a friend, get in touch with us.