Buying Property With Friends
Many people will caution you about doing business with friends or family, and caution is good. However, we’re talking about the people who we rely on to support us through life’s biggest moments. If partnering with a friend makes purchasing a property possible and you plan wisely then it can be a win-win situation for everyone.
Why would you want to buy a place with a friend? Let’s say you have a great roommate and you’re both paying $600/mo to rent an apartment. You’ve been thinking about buying a place and know a one bedroom at $130,000 would cost you around $900/mo when you include condo fees, insurance, etc. Your roommate is also interested in buying but she doesn’t want to live alone and also needs to save for a downpayment. One day you’re browsing properties online and you see a two bedroom for $160,000. If you bought it together it would cost you around $550/mo each, with the added bonus that your payments would stay the same as long as you live there rather than increasing each time your lease renews. Also, buying together doesn’t have to mean living together. You could buy a duplex and each live in separate units.
Why wouldn’t you want to buy a place with a friend? What happens if one of you decides to move out of state for a job, or wants to move in with their partner, or becomes unemployed? An important step in any successful business arrangement is knowing your exit strategy. This is a business arrangement – it involves a large amount of money and legal responsibility.
- Come up with a plan for
- how you will own the property (50/50?),
- how the down payment will be handled, and
- clarify expectations about your time commitment and long term goals.
- Spend time talking through realistic ways to handle any situation where one person cannot or does not want to continue owning the property.
Put all your agreements in writing. Planning doesn’t guarantee that you won’t fight or disagree somewhere down the line, but it will help to have a document you can reference to remind everyone what they agreed to. Also, if you can’t get through the planning stage in harmony, it might be an indication that you’re better off staying friends without getting involved financially.
There are other ways to buy property with partners. If owning your own place or building a rental portfolio is a goal that seems out of reach right now, partnership might help you get there sooner. Contact me if you’d like to learn more.