Buying a home with a friend has gone from a pretty unconventional idea to a fairly mainstream strategy. Recently, Rocket Mortgage surveyed potential home buyers, and nearly 60 percent of renters said they would be open to co-buying a home with a friend. Affordability was cited as the primary reason by nearly two-thirds of those respondents.
It’s not hard to see why this trend is emerging when you consider that combining incomes makes mortgage qualification so much easier. But the financial logic of co-buying and the practical reality of co-buying are two different things. Anytime you mix money and relationships, things get complicated – especially if you aren’t sharing finances across the board (like a traditional couple would).
The people who successfully co-purchase a house together tend to have one thing in common: They anticipate problems before they happen and put structures in place to handle them. The people who run into serious trouble are usually the ones who assume the friendship will sort everything out.
Knowing this, here are a few mistakes worth being aware of before you sign anything.
Mistake #1: Not Having a Legal Co-Ownership Agreement
This is the biggest mistake on the list. Unfortunately, most people skip over it because it feels too formal. You’re buying a house with a close friend whom you trust, and you don’t want to offend them by requiring too many rules. But that’s exactly the wrong way to think about it.
A co-ownership agreement isn’t a sign that you don’t trust your friend. It’s really just a document that protects both of you. It gives you a clear framework for situations that could arise. Think of it as a just-in-case document.
A solid co-ownership agreement should cover things like:
- What happens if one person wants to sell and the other doesn’t
- How ongoing expenses are divided
- How decisions about repairs and renovations get made
- What the process looks like if one person can no longer make their share of the mortgage payment
Without this document, you’re leaving those questions to chance. It’s your responsibility to get a real estate attorney involved before closing, not after a problem develops.
Mistake #2: Assuming Your Financial Situations Will Stay the Same
The financial situation that makes co-buying work today may look completely different in two or three years. In other words, what feels like a manageable split right now can become a serious source of strain if one person’s situation changes significantly.
Before you buy, have an honest conversation about financial stability and contingencies.
- What happens if one of you loses a job?
- What’s the plan if one person needs to stop contributing temporarily?
- Who covers the gap, and how does that get repaid?
These aren’t comfortable questions for friends to have, but they’re way more comfortable to talk through before a problem occurs than when you’re in the middle of one.
Mistake #3: Choosing the Wrong Ownership Structure
When two people buy a property together, there are different ways to legally structure that ownership. Joint tenancy is where both owners have equal shares and the right of survivorship, meaning if one person dies, the other automatically inherits their share. Tenants in common allow for unequal ownership shares and lets each owner pass their share to whoever they choose.
If one person is contributing a larger down payment or more of the ongoing costs, tenants in common may be the more appropriate structure because it allows ownership percentages to reflect those contributions. Joint tenancy’s automatic survivorship can create complications if your co-buyer’s share ends up going to their estate rather than being handled the way you’d both prefer.
Mistake #4: Skipping the Conversation About Long-Term Plans
The Rocket Mortgage data found that the biggest concern among people considering co-buying was how future life changes like marriage, children, and relocation might complicate things. The solution isn’t to avoid thinking about it. It’s better to talk about it before you buy.
- Where does each person see themselves in five years?
- Are either of you planning to move for work?
- Is marriage or a long-term partner in the picture, and how would that change things?
- Are there circumstances under which one of you would want or need to sell?
These conversations don’t have to be exhaustive, but they should happen. A co-buying arrangement that works well for two single people in their late twenties can get complicated when life circumstances move in a different direction. Don’t ignore it!
Don’t Rush This Decision
The current housing market creates real pressure. And while co-buying can be a smart move, you don’t want to rush into this just because you feel like you have to buy a home. That’s never a good way to become a homeowner.
If you do decide to go this route, take your time to carefully choose a co-buyer who has aligned financial values and is in a similar stage of life as you. If there are any red flags, walk away. It could save your finances, as well as your friendship.
The key to co-buying is to be proactive and patient. If you can do those things, you’ll eventually find your way to the right opportunities. Best of luck!
