Have you heard of the Australian television show Five Bedrooms (streaming on Peacock in North America) about five singles who decide to purchase a house together after finding themselves all seated together at a wedding?
So, is acquiring property with a person other than a spouse actually a smart plan or is it only something that happens in sitcoms? In the real world, there are benefits and drawbacks to consider!
Buying with a friend can be a worthwhile option for purchasing a first property. This is no doubt why doing so is far more popular among young buyers. The hike in interest rates, together with a housing shortage in certain areas and soaring home prices have created the perfect storm, making homeownership ever more unaffordable for many.
The Advantages of Co-ownership With a Friend
Purchasing a house with a friend is a growing trend: up to 25% of potential buyers are seriously considering it. This solution involves splitting the downpayment, monthly housing expenses and the property’s net value. It is, moreover, easier to qualify for a mortgage with more than one income in the equation.
Furthermore, by combining salaries and downpayments, it becomes possible to acquire a more desirable property and one which better suits the occupants’ needs. This is likewise an excellent way for both friends to earn a tidy profit when they resell the residence in a few years, enough money to buy a new home solo or as a couple.
Can Two Families Share a Home?
Single friends that are also single parents can look forward to an additional advantage: another shoulder to carry the load. Meals, chores, homework, groceries are all daily household tasks that can be shared. Cohabitation can be even more enjoyable if the kids get along. They will always have a buddy to play with! The more anxious may equally find living in a full house comforting, with the reassuring presence of a second adult in case anything happens.
The Risks of Owning a House With a Friend
This type of transaction also comes with its share of risks, such as disagreements about the daily housekeeping (like who does the cleaning), legal issues or a change in either party’s life. The buyers must carefully think through the consequences and potential fallout that could result from such a serious commitment. It is not easy to get out of a mortgage, financially nor emotionally.
How to Make Sure You Stay Friends
Several factors must be taken into account if one wants their co-ownership experience with their friend to be a success:
- Are both friends at a similar stage in life? For example, tempers might flare if one friend is still partying regularly while the other must stick to a strict sleep routine.
- Can both friends equally share the downpayment amount and mortgage payments? Real estate generally increases in value over time. Dividing the proceeds of an eventual resale will be easier if the parties have always split mortgage costs 50/50.
- Will all occupants be able to live together harmoniously? Or might some people find it difficult to live on a daily basis with a person who is not a close family member?
In any case, if you think purchasing a property in co-ownership with someone other than a spouse might be for you, make sure you carefully consider all such a decision’s legal, financial, lifestyle and emotional implications. You wouldn’t want to lose a friend and your home at the same time!