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Friends Buying Together |
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Dear Edith, Our son is embarking on his first home purchase. Due to the high housing prices where he lives, he would like to purchase a single home with two of his close friends. All have decent income, recent college grads in their first jobs. The others are living at home with their respective parents and looking to get out on their own, but do not want to rent.
When he approached me with this, all I could see was red flags thinking about all the things that could go wrong. Then I began to feel that with the right legal paperwork, maybe it could work |
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Yes, the project would require lots of legal input and a written agreement about the “what-if”s. People that age are apt to change jobs and leave town, so one of the first questions would be what happens if one wanted to sell his share to the others. They must also realize that everyone who signs a mortgage is personally responsible for the whole debt, and every owner is individually liable for the property taxes.
The arrangement could work well as long as everyone still is on the job and living in town, but if one developed financial troubles, that could mean problems for the others. Then, what if one wants to move in a girl friend? Or get married and move out?
I'm sure it can be done, but perhaps a safer way is for one to buy and the others to pay rent, if that can be worked out. Sometimes a mortgage lender will accept rental income when one tries to qualify for a loan. Not sure it would work in this case, but probably worth considering
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Edith
Originally published on December 6, 2006 |
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