The Pros & Cons of Buying a Home With Friends

Greg Mucha,July 18, 2022

Have you been wondering if teaming up with a friend to buy a home a good idea? There are always pros and cons, plus some tips to make it work!

If your friend’s credit isn't good shape, it can affect your loan, too
Moving out can get complicated if there is a disagreement
Your credit score may be negatively affected if your friend slacks on their portion of payments
Your ability to get another loan could be compromised

Try renting a place together first to see how you work together
Even if you're not going to be sharing living space, try to learn as much about your friend before purchasing together
Be transparent — about finances and everything else
Those who survive and thrive in the buying-with-friends partnerships are able to do so because no unpleasant surprises were lurking around any corners
Discussing both of you 'wants' and 'needs' can help with expectations in advance
Decide in advance how to handle mortgage interest deductions

home place mat in front of door

Outline household and financial responsibilities before you start looking for a place
Document, in writing, what the house rules, chores, and financial responsibilities will be while you live together
Talk to a lawyer, preferably one who's helped more than one set of unrelated people buy a house together. Ask them what scenarios could unfold and how to protect yourself against them
Do some due diligence before you commit to purchasing a house — whether with friends or solo. Remember, if you want to avoid capital gains tax when you sell your home, then you'll need to live there for at least two years
You may want to consider securing life insurance for each other to cover the loan balance
Before you go shopping and sign the closing papers together, make sure you know what your exit strategy will be and how you want it to unfold

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