Can Buying A Home Be A Team Sport?

Can buying a home be a team sport?

Should buying a home be a team sport?

The co-buying trend has become a popular way for people to purchase a home instead of renting.

Over the last several years, home prices and interest rates both rose to the point that home affordability has kept many people out of the game.

So, the question being asked by more and more people is…

Can Buying A Home Be A Team Sport?

In our opinion, the answer is yes. BUT, there are many factors that should be considered before you buy a home with a friend or relative.

There is a lot to unpack here, so let’s look at some of the reasons why many friends are pooling their money to become homeowners together.

Affordability and lifestyle are the two primary considerations.

Affordability: When prices continued to rise during our unprecedented run of low interest rates, people seemed to take that in stride. Once rates began to rise along with prices, more people started getting priced out of the market. For many, something had to give.

Combining funds to purchase a home is becoming much more popular today than it has been in the past.

Friends or relatives who have traditionally been roommates are deciding, in growing numbers, to purchase a home together.

Lifestyle: Some people are finding that pooling their funds allows them to have more space, or they can afford a more desireable neighborhood.

I am a firm believer in buying a home in an area that fits your lifestyle, if at all possible. To me, things like easy freeway access, great restaurants, quality schools, and recreation are very important.

Sharing expenses as homeowners:

When making a plan to become co-homeowners, it is a REALLY good idea to think it through before pulling the trigger. Consider your expenses including:

Mortgage payment
Property taxes
Homeowners insurance

Other categories include:

Home repairs
Home upgrades

Other monthly expenses:

Utilities – Does everyone pay equally? Even if someone likes it really warm or really cool in the home?
Household Food Items – Do you share everything? Should you have your own shelf in the fridge?

Are there more legal considerations when buying a home with a friend?

Will everyone be equal partners?

What happens if one party dies? Yeah, that isn’t always fun to think about. Does your interest convey to your “roommate” or do you want it to go to a family member?

Some of the terms you will come across will include Joint tenancy and tenancy in common. The type of ownership will need to be determined prior to taking title to a home with someone. For married couples, a very common way to take title to a home is “joint tenancy with rights of survivorship.” The typical thought there is for the home to automatically pass to the surviving spouse upon the death of the husband or wife.

For people purchasing a home with an unrelated party, it is relatively common to have their ownership interest go to a relative if they pass away. BUT, do you create an agreement that gives you the right to purchase that interest so that you don’t have some random new roommate?

You should obviously talk with a financial advisor and/or tax professional for guidance.

Should you have a joint bank account for repairs, expenses, etc?

Benefits and challenges can arise from co-homeownership. Have a plan. Please.

My Personal Experiences With Co-Buying A Home:

With the help of our father, my brother and I bought our first home on 8/8/88. We were 19 and 20 years old and purchased a small 2 bedroom, 1 bathroom home. We added another bedroom and bathroom on to the home and always had 1-2 additional roommates.

Purchasing that first home with my brother may have been one of the best financial decisions of my life. It was a GREAT experience that taught us a lot.

Just a few short years later, I purchased a 4-plex with a friend. Fortunately, we made some good decisions with that property and were able to turn it in to owning dozens of other properties before the age of 30. (homes, condos, multi-unit apartments)

I have been very fortunate to have had my experiences in co-ownership be positive personal and financial decisions.

While I can personally recommend purchasing a home with a friend, relative or business partner, I will also strongly caution against it in some circumstances.

Who Is Buying Homes With Friends?

These articles give some insight as to different types of people buying homes together.

These two best friends bought a home together in Austin. It seems that college roommates are a rapidly growing segment, for sure.

Owning my own home was always a dream of mine, and I feel so grateful that I’ve not only been able to accomplish that early in life, but also to have been able to do it with my very best friend – Madison White, Austin TX

Six friends in Toronto decided to pool their money.

But it started with one radical idea: that the benefits of cohabitating, combining their resources and skills, would lead to a far better standard of living than they could ever achieve on their own.

CNBC article about co-buying makes some good points, pro and con, illustrating multiple examples of people with different scenarios.

Co-buying is a trend that is here to stay and will continue to be a way for people to achieve the American dream of homeownership, Pendleton says.

So many scenarios. It is really interesting to see the types of people purchasing homes together.

Co-Purchasing A Home – So Many Decisions:

Please note: I don’t think it is always a good idea for everyone to buy a home with a friend. If done incorrectly or if unforseen circumstances arise, it could possibly end up being a nightmare.

So, are you ready to “swing for the fences” and make home ownership a team sport? Give us a call, we’d be glad to help coach you through it.