Would You Buy a Home with Your Bestie? Co-Buying Is Taking Off—But Here’s What You Should Know First
Spend 8 minutes on Zillow, and you’ll see home prices are through the roof. (Seriously—they shot up 10 percent in 2020, then another 19 percent in 2021, marking the sharpest increase in more than 30 years.) So if you’ve been dreaming of ditching your landlord and owning your own space, you may find yourself at a crossroads: How the bleepity-bleep can I afford it?! For many, the answer is simple: go in on it with a friend.
About 55 percent of people would consider buying a home with a pal or relative, a trend known as co-buying, and about one in three Americans already have, according to a recent Realtor.com survey.
PureWow Editor-in-Chief Jillian Quint and her husband, Dan Gordon, took the leap back in 2010, buying a three-family townhouse in Brooklyn with another couple. For them, a huge part of the appeal was being able to leverage each other’s assets to become homeowners—one couple had the cash for a down payment, another had the salary necessary to secure a mortgage. “On our own, we might have had trouble buying, but together, we were much stronger,” she explains.
So, is co-buying right for you? It’s no easy decision, but we’re here to help. A few things immediately spring to mind: “You’ll both want to consider your finances, your tolerance for risk, what you both want out of your new home, and who will be responsible for upkeep and maintenance,” says Rachel Stults, Realtor.com managing editor and co-host of the House Party podcast. Here’s what you should consider before making an offer.
1. Ask This Question First
“If you’re thinking about buying with someone, brace yourself for a lot of heavy discussions and heart-to-hearts,” Stults says. Before even touring homes, you’ll want to zero in on your why—as in, why you want to buy a home—and make sure you’re on the same page. “If it’s simply to save money on rent, or if one of you doesn't plan on being in the home longer than a year or two, then renting may be a better option for now.”
2. Decide Who Pays for What—and How Much
After that, you’ll want to dig into finances—after all, it’ll all come out when you apply for a mortgage anyway. “You’ll need to divulge to one another your credit scores, your debt history and any other blemishes you might have on your financial record,” Stults says. “When you go to apply for a loan, the lender will evaluate you both as individuals. Banks will use the lower credit score of the two individuals, and that will impact your rate and how much you’re approved to borrow.”
You can have the person with the stronger score apply solo, but that means you also lose the benefits of having that person on the loan (like their salary).
You’ll also want to figure out how much of the home each person owns, and how you’ll pay for everything, from the down payment and closing costs to the mortgage, insurance and utilities. In Quint’s case, that meant owning one-third of the property (or one of the three apartments in the townhouse), while the other couple owned two-thirds. “This 70/30 split factored into everything that was deemed a shared expense,” she says. “If we had to redo the roof, we paid 30 percent. When it came time to address the water bill, we paid 30 percent.”
3. Figure Out Your Exit Strategy Before You Even Start Co-Owning
Is this your forever home? Or forever rental? Do either of you think you’ll sell it—or want out? If so, when-ish? Talk through how things would work if one or both of you wants to sell the house at any point. Even if you think you’ll all live there forever, it’s worth mapping out an exit strategy, so you’re all on the same page.
“Our plan was always to own the home for five to seven years, and then sell. When seven years came, and the other couple wanted to stay, we decided to sell our 30 percent share to them, at an agreed-upon price based on the current home value,” Quint says. (They hired an independent appraiser to help determine the sell price.)
4. Determine How You’ll Handle Repairs & Maintenance
Buying a home is like inheriting a never-ending to-do list. That may sound bleak, but there’s some truth to it: You’ll be responsible for all kinds of home maintenance and repairs over the years, and you’ll save yourselves a lot of headaches early on if you discuss how you’ll approach both. “Which one of you will mow the lawn on the weekends, or do you agree to budget for a landscaping service? If the kitchen sink is leaking, which one of you will get under there with a wrench to fix it?” Stults asks.
Talk through who handles what and how you’ll pay for any associated costs.
5. Meet with a Real Estate Lawyer
It may seem like overkill—you two agree on everything, what could go wrong?!—but it’s crucial. “A lawyer can draw up a legally binding contract that will protect you if things go south in the relationship. You’ll want to spell out everything—including what each person contributes to the down payment, what each of you will pay toward the mortgage, taxes, utilities and maintenance,” Stults says.
Ultimately, communication is everything, especially talking through every hypothetical situation you can think of—from what type of mortgage you’re comfortable with to who takes out the trash—before you get started. “This enabled us to work our way through tricky situations, and stay friends at the end of it,” Quint explains.