Are you thick as thieves with your bestest buds, but you’re all struggling to buy a house on your own? Well, as the saying goes: A friend in need is the possible co-owner of a home. OK, that’s not exactly how it goes, and we promise to stop with the friendship puns, but you’re getting our point.
Owning real estate is the No. 1 way to create long term wealth and stability – not just for yourself, but for the generations that follow you as well. And, despite what modern history has led us to believe, you don’t need a romantic partner, or to figure out how to save for a downpayment alone, to become a homeowner.
With housing prices rising, buyers are coming up with all sorts of creative ways to purchase property. (We love this group who built a tiny house community together, affectionately dubbed “Bestie Row.”) So why wait? If you and a group of pals are ready to take the plunge, but don’t have anyone to dive with, you may not need to look any further than each other. Below are two options to consider.
Private property or condo
Friends buying houses together is a growing trend, particularly among millennials. For some, it’s a more favorable way to get out of their parents’ house than renting. Others are living with roommates into their 30s anyway, so they might as well build equity in the meantime. Buying a house or condo with friends can be a great alternative to footing a mortgage on your own, or waiting to find a significant other.
But since doing anything with a group of people can get complicated, it’s best to put as much in writing in advance as possible, with the help of a lawyer. Questions you’ll likely consider:
- Who is responsible for how much of the down payment?
- Who will own which percentage of the property?
- What happens if someone can’t pay their portion of the mortgage, or decides to move out and sell their share?
And what about chores? Even divvying up household tasks and establishing a shower schedule can prevent disagreements down the road, and help everyone cohabitate happily.
You may also be thinking: what kind of mortgage would you take out with your buddies? The same as any other. It would be a joint or shared loan, which is when two or more borrowers are the recipients. Bringing the financial documents for several different people probably seems like a headache, but from a lender’s perspective, more people might actually be better. It’s your combined income that will be considered for the loan, after all, and the greater that figure is, the more it will offset existing debts and the price for the property.
Housing cooperatives are typically found in major cities like New York, Washington, D.C., and San Francisco, but that doesn’t mean they can’t exist in other places. And co-ops aren’t only in apartment buildings, they can be in any kind of multi-family complex, even mobile home parks and farms.
Organizations like Co-operative Housing International are working to encourage a national co-op movement. Their mission is to help homeowners everywhere reap the benefits of this type of housing, which can include everything from social inclusion (think, group activities and shared childcare!) to government subsidies in return for affordable housing.
The concept of a co-op may seem confusing, especially to those who live in places where they’re less common, but we can explain them pretty simply. Here’s the tea: rather than buying a unit in a multi-family complex, co-op members purchase shares in a co-op, which gives them the right to occupy a designated unit under a proprietary lease. They pay monthly dues for maintenance, insurance, and other bills, and an elected board makes general decisions, like who can buy in and when to replace a roof.
There are several different financial structures for co-ops, but they generally fall under two categories: limited equity co-ops and market rate co-ops. Limited equity co-ops are available to households with specified income caps, and resale prices and profits are restricted. Prices for shares of market-rate co-ops, on the other hand, are determined freely based on the open market.
So, are people actually doing this? Yes! More than a million families currently live in co-ops around the country, according to the National Association of Housing Cooperatives, and starting one can be surprisingly simple. There are numerous nonprofits available to help you get going, and various mortgage lenders offer loans to co-op founders. It’s also possible to convert rentals into co-ops, and then you don’t even have to move. All you need to start is some determination and a few like-minded folks to join the flock!
So what do you think? Buying with a best friend? Or prefer to go it alone?
Either way, the Keep Home™ app has all the resources you need to navigate the home buying and owning process.
Interested in more alternative buying methods? Our story “5 Creative Ways to Afford Your Dream House” offers great ideas.