Friends often share holidays, vacations and important moments in life. Why not buy a home together? Joint ownership makes sense, especially for those unable to afford a home on their own. Each can enjoy a real estate investment, and can even strengthen the friendship.
The opposite could happen as well. Friends can feud over the most trivial of things, placing the long-term housing investment at risk. Here are some tips for surviving co-ownership with a friend:
- Disclose financial information: Know what you’re getting into. Agree upon the type of home and location, and are comfortable with living with one another.
- Consult with an attorney: A contract is vital, as is listing each person’s name on the deed and the mortgage papers. The percentage of ownership must be clearly stated in the contract, including details of each person’s share of the down payment and the way in which mortgage payments are to be divided. This sets the stage for deciding each one’s share upon sale.
- Get pre-approved for a mortgage: Odds are those buying a home will need to jointly qualify as co-borrowers on a single mortgage in order to purchase a property held in tenancy in common or joint tenancy.
- Understand wants and needs: Options and terms will be contingent on each individual’s credit history, financial health and obligations—as well as what you’re both looking for in a house. Discuss all of this ahead of time.
- Have an exit strategy: Job changes or unexpected romances could evolve where marriage will soon be in the picture. What happens then? This should be agreed upon before the house is bought.
Finding the perfect home for two can be a challenge. Just make sure that when buying any real estate with friends, you don’t let the friendship cloud your judgment.