DH’s parents and his four siblings went in equally on a condo in Maui. We declined. Ten years later, one of the sibs needed out due to divorce, and all hell broke loose. It was an utter mess of bad feelings and wrecked finances. Disaster avoided.
Rule: Never, ever mix finances with relationships you care to keep.
OTOH, my brother and I co-own my mother’s house. The house is in a trust which clearly states that should my mother pass while occupying the house, it will be sold and the proceeds distributed equally. If she can no longer live in the house and requires care, the house will be sold, and the proceeds will go toward her care. Anything left at her passing will be distributed equally.
My mother does not have any significant savings of her own, so we are using the house as her LTC plan.
I know folks who have done so, but only for rental properties.
Others, including us, with respect to land in order to protect privacy and/or views.
May become more common due to high housing prices and shortage of inventory. Last week, one source (Zillow) released an article showing starter homes in many communities (233 US cities of which 113 are in California & 32 in New York state) in 25 different US states start above $1 million.
Yesterday, News Nation shared that hedge funds are buying up mobile home parks and increasing both prices and rent forcing-out many on fixed incomes. Mobile homes are being purchased and flipped for substantial profits.
We actually do co-own property with my BIL (H’s brother) and have for several decades. It’s costing more than it’s bringing in as it ages and was poorly managed for several years. It’s a small old 8 unit apartment building. We are currently trying to sell it as we are tired of maintaining and co-owning. The brothers inherited the property from their dad. We would not have purchased a property with him but it’s been ok except when we needed to get all owners to chip in money to help cover costs.
Right now, H&I paying close to 6 figures as a loan to get everything rewired so it will be safe and up to code and will be repaid when the property sells. BIL is cash poor but equity rich—we didn’t ask him to contribute.
My Dad quoted “Ricky Ricardo” often: “Nunca haga negocio con familia ni con amigos”
Translation: Never do business with family or friends.
I can’t imagine what a group property purchase would be like with the finances involved from two different households. Mess, mess, mess, mess!
I would really question the integrity of that real estate agent who would suggest something like that.
I can see if it’s the parents helping their child and spouse to purchase a starter home. But two different households???
I would too! I think some real estate agents just want to convince everyone that they should buy a house…which ok, I get that people buying houses keeps real estate agents in business, but come on! I think some agents are saying it’s a way for the younger generations to buy houses, but even then it’s probably not a great idea. The younger generation is likely to move for a career, get married, have kids, etc and they may not quite have the experience, maturity, or finances to really make something like this work.
Like you said, it’s one thing if you’re “helping” your child and spouse with a starter home (and I would think helping is different than buying the house with them), but it’s a whole other can of worms doing it with friend or family.
My cousin and her husband asked if H and I wanted to buy a second home with them, but we said no. It was a nice house on a golf course (cousin’s husband is a golf fanatic), but it was very expensive, in an area we wouldn’t really want to go to otherwise and not much to do besides play golf, swim, and go to outlets(H doesn’t play golf). Also, they never ended up going through with it, because they couldn’t afford a second home on their own unless they bought it with someone else. And lastly H doesn’t really like my cousin’s husband, so he said no right away!
And I had a family friend’s son who bought a house with friends in his late 20’s. Yeah that didn’t go well. Plus, these guys got lots of complaints from the neighbors and they got in trouble with the HOA. I also have a co-worker who bought a vacation home with relatives and it didn’t go badly, but they ended up regretting it and they almost never used it. But, I think they felt pressured.
I would definitely steer FAR away from any realtor who even hinted that buying a property with a friend would be a good idea—this realtor clearly doesn’t have clients’ best interests at heart.
My brother bought a house with friends/relatives. He put up lion’s share of financing and took majority of risk but when it was sold at handsome profit got a tiny bit of the profit—left a bad taste in his mouth. He decided never do purchase with those people again as we all felt he was badly cheated.
It was stupid of them to be so greedy—my brother is an easy-going guy and would have been OK with a fair split and would have considered future deals but this slammed the door as he realized he was dealing with cheats.
My nephew (35) and his wife bought a vacation home during Covid with friends. So far it’s going great. They usually spend a month there in the summer and love having the friends around. Their kids call the friends Uncle and Auntie. They are in finance so have the money to do stuff like this and I imagine they made a good arrangement. So far so good on it! No cracks showing yet.
If it’s well thought out and people have common understandings, it CAN work. I think sadly that’s the exception rather than the rule in these circumstances.
It seems a particularly bad idea for young adults starting off in life. There will likely be sifferent timing of meeting significant others (and waiting to live together at some point), new job opportunities (which may require relocation), evolving lifesryle preferences, etc.
This is what happened to my friend - her bff needed to relocate, wanted to sell, she couldn’t afford to buy him out but also didn’t want to let the house go… and they evidently hadn’t planned what to do in that kind of event. I’m not sure of all the details of how it evolved, but she’s still in the house, financially struggling, and they don’t speak anymore.
This is a common scenario in divorce where one party (often the wife) fights tooth and nail to get the house… and then realizes that she cannot afford to stay in it long term. Once you’ve factored in property taxes, maintenance, repairs and the occasional water tank flooding… home ownership is a lot more expensive than realtors lead you to believe.
I know someone now in this situation… her friends are encouraging her to sell- currently a sellers market in her area-- before the overgrown yard and the tree which needs to come down become problematic. She’s digging in her heels-- naively thought she could go to court to get her alimony revisited… but there’s been no change in circumstances for either of them, except that the math is no longer viable.
I feel for your friend. But as I’ve told MY friend- “That’s why they invented garden apartments, so you can grow tomatoes on your deck and pretend you’re still living in your house”.
Hasn’t been bad at all for my nephew. He and his friends bought the house, then he married his fiancé, then they had two kids, and they are still loving the arrangement. They spend a lot of time there in the winter and summer (it’s an all season very popular vacation destination). The whole group is often together. It’s really an ideal situation for them. Not sure it’s something I would want to take on, but if you are smart about it and have a plan (they are very very smart and have very many plans and are in well paid professions) it can work.
We manage my MIL’s small vacation cabin and while it’s a lovely little old place it’s a pain in the butt running everything that needs to be done past MIL and her boyfriend. It would be so much easier if they would just let us do what needs to be done (like get a new HVAC or new roof).
I concur with most of the advice on here. Different owners’ lives will go in different directions and they are likely to need to move, need the equity, have kids, have financial difficulties. All of these are likely to create problems and strain friendships.
We own a vacation house with ShawWife’s SIL and husband from ShawWife’s family. We knocked down a very poorly maintained cottage on a lake and built a very nice, simple, contemporary building. The house is in a site of great sentimental value. The SIL lives about 5 hours driving away and we are probably close to 7. If it were not sentimental, I would have argued against it strongly. We use it for about a month a year, SIL uses it more. Our kids love the space and use it about a week a year each. Even so, there are conflicts with SIL and husband. They wanted to keep working out who would get it when. I suggested that we take August and they take July. That was OK for a while, but now they want to alternate (OK with me as long as we nail down the schedule). A brother who no longer has an ownership interest wanted to rent it for a week during the summer and until this year, the only dates that would work were in our month. But, because we have a much nicer house, it is not a big deal for us to forsake time.
While it is likely to have appreciated in value a lot since we built it, I’d prefer to have the equity and forego future maintenance/improvement payments. We don’t have an agreement on what would happen if one party chose to exit. But, we are in a financial position where it is not a big deal if we keep paying for it and underusing it.
That would not be the case had we been much younger. And it could have caused real problems with at least one sibling. Those problems are the ones the OP and friends are likely to have.
This happens from time to time in my area. Basic homes cost $2M+, which hardly any first time home buyer young persons can afford, with current 7% interest rates (mortgage would be $13k+/month, in the unlikely event someone would approve such a mortgage). Instead some young persons do a shared purchase and live together in the home. They may also rent out all of the available bedrooms. If the home has 4 bedrooms, 4 different young persons that are not related may live in the home… sort of like a continuation of college.
People I know who did this, did not have particularly negative comments, but they may have been trying to make a good impression and make things seem more positive than they actual are. The negative things I did hear about were general roommate type things, rather than home ownership type issues. For example, different persons living in the home preferred different levels of cleanliness. They settled this issue by hiring a housekeeper to come in a couple times per month, with all roommates sharing the bill. There were also issues with roommates having different degrees of like/dislike towards a particular pet, or issues with a particular roommate regularly letting guys stay overnight who eat the shared groceries.
While living together as roommates may work out, I expect the more notable issues may occur later on, such as what happens if the owners want to sell at different times? Or what happens if one of the owners is not keeping up with their share of the mortgage payments? I think it has much better chance of success with a single owner who rents out the rooms, rather than a group ownership.
Back in the early 80’s, when I was single, renting and getting killed in taxes, I bought a house with three other single guys I worked with. We were friends before we even considered doing this. It worked well for the first couple of years and then one of the guys wanted out so as he wanted to get married. At first we were going to buy him out but one of the guys got cold feet. And that’s where it went wrong. Two of us (I was one of the two) didn’t want to have a greater share than one of the other owners, so we had a stalemate.
We never got lawyers involved but almost. Finally, two of us bought out “marrying guy” and “cold feet guy”. We agreed to rent a room to “cold feet guy” to make the deal work. Of course, as soon as papers were signed, we gave “cold feet guy” notice to move out. Kind of mean move on our part, but we had had it with “cold feet guy” at that point.
The two of us rented out one room and so there were just three living there. My girlfriend and I decided to get married a few years later. I went to my co-owner and told him what I thought the house was worth and told him he could either buy me out or I’ll buy him out at that price. My co-owner said he was already thinking of doing something different and so I bought him out. That was about 6 years after the group bought the house.
So, it kind of worked out well for most of us. Worked out best for me as the market went up big time after I totally owned the house. My wife and I finally sold the house after I had lived there over 20 years.
We had talked about how we were going to break up before we even bought the house. “Cold feet guy” went back on our (unwritten) agreement and that’s why we were so mad at him. Of course, when he did back out, we were so mad at him we wanted nothing to do with him. Therefore, the boot. We actually made up with him later. Not close friends at that point, but not enemies either.
I have friends that bought a duplex (each unit is 2 bed, 1 bath) in the late 70s together and are still there. It has worked out for them. Not sure about a “house” though. Although my friends daughters bought a house together and so far they’re happy. But that’s not “friends”
Here is an article about doing this. The deal had to be terminated, but that was due to one party having to move due to other issues. Full disclosure: I used to know one of the parties to this deal.
While I agree that doing this is fraught with difficulties, it is also reality that in many areas of the country it is almost impossible for young couples to afford a house. So, an idea like this is tempting.