A neighbour of mine just scored a great house: fully renovated, two great apartments, just what he wanted. Why was it so nicely done? A brother and sister had owned the house together and put it on the market for a good price. Why? He suspects they were good and sick of each other and wanted to get out of that house.
So their loss is his gain. But what if you want to buy a house with a friend or family member? On first blush, it’s a really smart thing to do. If you’ve got someone in your life who has some money saved, but not enough for a place on their own, why not combine forces and get a place together? It can mean you both together can afford a house in a nice neighbourhood, instead of a tiny condo.
You may want to share a house for other reasons. Maybe your buddy is super handy with a hammer, while you’ve got a flair for décor. What a team! Or maybe you want a place but worry about being alone, and knowing someone else is in the next room or on the floor above gives you comfort.
But buyer beware. Sharing the biggest purchase and investment in your life has risks. It’s like going into business with a friend. You may not want the same things over time. Your relationship could suffer. Or, it could be the best thing you’ve ever done.
Here’s some things to consider:
Be Sure You’re Compatible
To share the same address, you really need to have similar values and goals. That’s why siblings often make great roomies — they grew up in the same house and are used to sharing space. But if one of you wants a top of the line home while the other would prefer shopping at Goodwill for home items, you may have a bad mix. You need to be in synch about issues like renovations, cleanliness, lifestyle, mortgage terms and neighbourhood.
Open Up Your Finances
Before you buy together, you need to fess up to your financial situation completely. No hidden debts, no issues with a secretly bad credit rating. Your financial futures will be intertwined with this purchase, so you must be prepared to be honest with each other. As well, those financial specs need to be similar. If you want to put an extra $1,000 a month into the house to make it amazing and your buying buddy can’t afford to hire a plumber, you’ve got a problem.
Draft an Agreement
Get a lawyer to help you put together an agreement for joint ownership. If it’s 50/50, what does that mean for the bills, the mortgage and the equity when you eventually sell the place? It’s not easy to think this way, but you need to write up an agreement that will help you share ownership and divide the equity even when you’re not getting along. Be sure a lawyer is on board through this process and through the house sale as well to make sure both your names are all on documents.
Joint homeowners should purchase term life insurance and name each other as beneficiaries. That way, the mortgage can be paid off in full if one of you passes away. Resist the urge to go the easy route and get mortgage insurance: it’s underwritten at the time you make your claim, and many claims get rejected as a result. Talk to an advisor to find out just how much insurance you need and for what term to be sure both of you are totally covered.
Many who buy a home together opt for a place with two separate apartments. Perhaps that won’t be the case for you. But whether you’re in close proximity or not, be sure that you set things up so each person has personal space. That might mean locking doors between the apartments and calling ahead before dropping by. Agree on what kind of boundaries you’re comfortable with early on and adhere to them.
Get a real estate agent on board who really gets what the two of you are looking for. Again, if this plan is to truly work, you both should agree early on what type of home you want and in what neighbourhood. The purchase price has to be in line with both of your expectations, and you should both be there every step of the way through the buying process.
It’s hard to ensure that both of you are getting the same and putting in the same at all times, but you’ve got to try. If one of you has a larger apartment, be sure the other gets nicer appliances. One gets the backyard? The other has a deck — and no responsibility for weeding. You called the plumber last week? Your housemate has to find an electrician the week after. You may have to be creative here, but this is probably the most important point. As long you both feel you’re putting in and getting out the same as the other partner, you should get along.
When It’s Over
Easily the biggest downside of buying with a non-romantic partner is that the joint ownership probably has an expiry date. One person gets a job overseas. The other gets pregnant. It’s not inevitable, but very likely this joint buying project will have to end. Be realistic early on about how long you hope to own the house together to both build up some equity, feel your work on the house wasn’t for nothing and be ready to move on to perhaps buy on your own.
If you do a joint buy properly, by respecting the other person and keeping your goals realistic, you’ll both come out better for it. You’ll both get home owning experience, build up equity for another buy and have had a safe place to live with someone you care about for a few years or maybe even longer.