House Buddies: Buying Real Estate With A Friend

Are you young, single, and broke? Are you also dreaming of buying your first home, but feel overwhelmed financially? If you can't face the mortgage payments alone, there is another option for you. A growing trend throughout North America is for friends or family members to purchase property together and become co-owners.

When you buy a home with a friend, you can either live together as roommates, or keep the property as an investment and rent it out. You also have a choice as to how you split up the equity—whether you keep things simple at 50/50 or one of you takes on more of the payments/ownership.

Real estate has always been one of the best ways to build equity and to stand on stronger financial footing. Every month that you pay rent, you're putting money into other people's pockets which could used instead for monthly mortgage payments. When you're finished paying off the mortgage, you have a house that's your own. At the end of a rental agreement, you walk away with nothing.

Co-owning has become a viable option in recent years, as people are waiting longer than ever to get married and have children. It makes sense to build up equity in the interim.

Buying a home with a friend also means that you share the down payment, monthly mortgage payments, and the costs of repairs and maintenance. Because you'll be saving a great deal of money, you and your friend can shop around for a larger property, or find one in a nicer area than you'd otherwise be able to afford.

In addition, you get to share a home with someone you love and trust. No more lonely nights!

Co-owning definitely has its benefits, but like any partnership, there is room for conflict. Before you start looking for a house, you and your friend need to hammer out all the details and put them in writing. There is too much money at stake to keep things vague, so write everything down.

First, you need to come to an agreement about what kind of home you're looking for, in what area, and what price range. Determine how long you're both willing to search for a home, and how many homes you each need to see before you'll be ready to make an offer.

Once you've found a place you both like, you need to hire a lawyer to draft up a legal document that'll detail how the property is divided, what each party is responsible for in terms of household expenses, and what happens to the home if one of you dies. If your friend passes away, will their share of the house go to you or to their surviving family members?

You also need to decide what will happen to the home if one of you wants to sell before the other person's ready. For instance, you could meet someone special and want to start a life with them. In this case, you'll probably want to sell the house that you share with your friend, but your friend might not be ready.

There are also smaller details that need to be ironed out such as who gets the master bedroom, what decor will go where, or how you'll divvy the grocery bills. These things may not seem important right now, but often it's the small things that create the most tension in a co-habitation situation. By planning ahead for all scenarios, you'll save yourselves a lot of grief—and potentially save your friendship if conflict arises.

If you plan smart and communicate well with each other, becoming co-owners of a property could be the best way to enter the real estate market for the first time. You'll work together to build up your financial security, share the pride of home ownership, and have a great time doing it.