Wednesday, July 14, 2010

Would you buy a property with a friend?

As I recently perused condo listings/real estate blogs and daydreamed about the day when I’ll be able to afford to become a homeowner, one particular listing caught my eye. This listing billed a 2-bedroom condo in my city that is up for sale as "perfect" for friends that want to purchase a home together. This listing made me pause and think about whether I would consider purchasing a property with a friend if I end up becoming a homeowner before I marry, which could feasibly happen since I am not married yet. Purchasing property with friends/significant others is not unheard of, but honestly, it’s just not something I ever considered. I’m aware that many 20-somethings live with their significant other’s or friends (and sometimes both!) and some also choose to purchase property with them.

But in my opinion from the outside looking in since I’m not actually in this situation, purchasing a property with someone other than a spouse brings up many considerations. I don't feel that I can effectively talk about issues around cohabitation, but other personal finance bloggers have succinctly explained this issues on the 'Interwebs.' I’ve never actually had a ‘falling out’ with a friend since adulthood, but I’d be wary of making such a huge financial decision with a friend or group of friends. What happens if your co-owner/best friend becomes your ‘frenemy’? I don’t think I’ve ever actually used the word “frenemy” in a sentence. I’ve clearly been watching shows like The City too much lately…Here are a few positive and negative considerations that could come into play when purchasing a property with friends:

Positive considerations
  • Pooled resources can translate to a larger down payment than one person could afford on their own in most cases.
  • You have the ability to customize a home more than you can with a rental (you can't even't paint your walls in some rentals).
  • You are building equity in a home instead of paying out rent.
  • If you happen to be an animal lover, you can have pets in a home if your co-owners agree to the pet.
  • Shared housing whether you are a renter or homeowner generally translates into lower housing costs.
  • Some legal concerns that co-owners going into the situation have can be addressed in some type of agreement or contract to prevent issues down the line. The agreement could addresses issues like how to handle transference of ownership among other key issues.

Negative considerations

  • All co-owners may not have credit ratings in a range good enough to get the best possible interest rate for a home loan.
  • Liquidating property when one or more of the co-owners is ready to move may be difficult if all parties aren’t ready to move at the same time.
  • Co-owners may have differing opinions on how much money should be spent on insurance or budgeting for unexpected expenses.
  • Issues could arise if all co-owners can’t agree on what their ‘pet policy’ will be.
  • Typical ‘roommate issues’ such as miscommunication around cleaning, maintenance, housework can arise.
  • Potential problems could arise if one of the owners is unable to pay mortgage due to issues such as loss of employment.
  • Coming to a consensus on issues like home improvements and décor may not be easy.

Sharing homeownership with a friend (or more than one) is not something I would discount completely, but it would take a lot of consideration before I would agree to it. I'd personally rather wait until I am in the financial position to purchase a property on my own or with my future spouse.

But what do you think, would you buy a property with a friend?


Anonymous said...

I live with my best friend and I would still, never want to buy a condo or a house with her. It would make more sense to buy the condo myself and then have her for a roommate, so I can pay the mortgage with both our "rent."
I think the most difficult part of living with someone is, there is always an excuse for someone (not only my roommate, me too) to "run out of time" or "be too busy" to clean up after herself. It gets pretty old. I can't wait until I can afford to live alone. It would be an interesting idea, though. I mean, there are plenty of friends who probably do purchase homes together.

Anonymous said...

I wouldn't buy with a friend, because you never know what life has in store for either person. Things pop up all the time... like job transfers, going back to school out of state, engagements, kids, etc.

My roommate and I signed a 15 month lease last July. Going into it we knew that one or both of us would move before the lease was up. She moved in June. Owning property together may have made the transition sloppy.

me in millions said...

i saw the title and my response immediately was NOT A CHANCE!

Forest said...

I did it. I regret it.
Of course, I also know people that did it and it worked out just fine.