Buying a house with a friend...

[drlove]

I have a female friend who wants me to buy a house with her, as an investment to increase our asset base. We would share the mortgage and other related expenses 50/50.

It sounds good, since my expenses would be cut in half by virtue of having a partner, and I would be building equity at the same time. However, what are the legal issues involved?? I keep thinking "what happens if..." I want to make sure I'm covered regardless.

On top of that, I'd have to live with her; not that there's anything wrong with that, but I'm used to being on my own. Sharing my residence would require some adjustment on my part.

Any thoughts??

 

[booboobear]

It sounds good, since my expenses would be cut in half by virtue of having a partner, and I would be building equity at the same time. However, what are the legal issues involved
On top of that, I'd have to live with her; not that there's anything wrong with that, but I'm used to being on my own. Sharing my residence would require some adjustment on my part.

Any thoughts??

The legal thing is easy to cover just get a good lawyer. Make sure there is a clause covering what happens if she defaults and exactly which expenses are split. make sure repair costs are split.

As for the change in lifestyle it might be a good thing. I,m sure you could make one room a den if you wanted to be alone.

I shared with a women once and this is what I did. My thoughts.

 

[drlove]

I would consult a lawyer regardless to draw up a contract; however the issue of "common-law" is interesting since we're just friends - no romantic involvement. Therefore, do these issues still apply??

 

[beaver]

Also, make sure your lawyer set you up as "tenants in common" rather than as "joint tenants". With joint tenants there is a right of suvivorship with tenants in common there is not.

 

[midLifeCrisis]

Yes, see a lawyer.

And make sure there is a "shotgun" agreement on the house, whereby either party can say the arrangement is over and the house is worth this much ... the other party must either buy or sell at that price.

 

[DonAngelo]

On top of that, I'd have to live with her; not that there's anything wrong with that, but I'm used to being on my own. Sharing my residence would require some adjustment on my part.

Any thoughts??

The biggest danger could be, that one of you is hoping for more than just friendship and the other person starts dating and bringing their dates home; then the deal will go sour in a hurry!

 

[Bush League]

I am from the US and will not offer any Canadian legal info, however, I own several rental properties and there are some other issues. One of the houses I had a partner and didn't work out very well. Make the term on the mortgage as short as you can afford, or but some decent money down. Build up some positive equity in the house as soon as possible. There is nothing worse than trying to sell a house and having to write a check after the sale to cover the mtg. balance, especially if the partnership has broken down. Besides, if you had a 20 or 30yr mtg, think of how many people you are still friends with that you knew 30 years ago. Relationships change, and not always for the better. I am a tax accountant, and maybe one in ten people who take out a long mortgage and say "I'll just pay extra to pay down the principal faster" actually do it.

Also, there will be out of pocket expenses, which can create some issues. But there are also personal time issues. Is she a person that is at all handy. There will be many things over the years on this house you that require repair that you will do yourself to save. If she can't help in these areas, guess who will end up doing all the work. It will feel like a burden on you evertime something breaks or needs attention. I'm not trying to be negative. My rentals have worked out very good. Just trying to bring up a couple of issues before hand. Good luck.

 

[MojoRisin']

If you are good friends i would avoid this at all costs. Ive seen this happen a couple of times over with some friends of mine. The place was an awsome party house, but it had the possibilities of creating many dissagreements that wouldnt be there otherwise between friends. Leagally there are concerns of course and they have been noted but my biggest concern would be of the potential loss of a good friend. In my opinion your friendship will never be the same if you do it

 

[gala]

I would consult a lawyer regardless to draw up a contract; however the issue of "common-law" is interesting since we're just friends - no romantic involvement. Therefore, do these issues still apply??

Yes!!!!!

In fact, in this new modern age, it doesn't matter whether your live-in partner is male or female. The government no longer discriminates on the basis of gender or sexual orientation, and as a result you can wind up being common law married to another guy, even if you are just friends living together.

Stoooopid.

Get something written up so that it is clear that while you are living in the same house you are not living "together", not "cohabitating" (ideally have separate "unit numbers" to live in, so that your address can be written differently, even if that's sort of insane in a single house), so you won't be common law. Get a lawyer to arrange the ownership details. Since you are just friends there should be no bad blood over getting it nailed down.

 

[booboobear]

If you are good friends i would avoid this at all costs. Ive seen this happen a couple of times over with some friends of mine. The place was an awsome party house, /B]

I think it all depends on how mature the people are and their expectations.

 

[MojoRisin']

I think it all depends on how mature the people are and their expectations.

Their are always the best of intentions going into something like this but things change drastically when money and responsibility are involved. As far as being a good party place. It was for all involved. Its waking up the next day and the "friends" having to still deal with bills, whos taking out the garbage, whos dirty dishes are in the sink...etc etc....Two of my best friends didnt speak for years after owning a house together and another couple are still not talking and it appears may never. Just be careful

 

[booboobear]

Their are always the best of intentions going into something like this but things change drastically when money and responsibility are involved. careful

I know what you mean but I think a lot depends on the age of the parties involved . I don't know how old drlove is or his friend
or their maturity but maybe they are not the partying kind.


I agree with you that they have to be careful and have a good contract.

 

[MojoRisin']

i dont mean that the parties were the problem. I just threw that in as an aside. Wasnt an affect on their relationship. I think we all see the sensitivity of the issue though.

 

[Bush League]

Hey, we just sold the house and made 20K. We should split it 50/50. Yeah, but I did more of the work and repairs. Yeah, well I didn't want to sell, so you should pay the realtor and closing fees. Well I......... Sale of an asset, inheritence. You can't believe how it can drive a wedge, even with success.

 

[mtl_guy]

I have 2 pairs of friends who have done it and both situations didnt work out.

In one of them, one of the guys met a girl and moved in with her shortly after the house was purchsed. He paid the bills on the house but forced the sale of the home soon after.

The other situation had a bunch of small problems which snowballed. The house was sold and the friends drifted apart.

The lawyer can protect you from legal issues but you need to have an understanding with your friend among personal issues.

What if she wants a boyfriend to move in? What if both of you do? How do you split money? How do you split the living space?

What if one of you wants to move out? Again legally this can be in the contract but you can lose a friend over this.

How about pets? If you want a dog and she is allergic?

What if someone has a baby?

Theres so many "MAYBEs" that can come up.

 

[cnmb]

If you are good friends i would avoid this at all costs.

me too, distance between people is necessary to any good relationship.

 

[DATYdude]

A lot of good points here.

The emotional, psychological, and practical aspects of sharing a place and a mortgage with a friend are important to consider.

Legally the liability on a mortgage commitment with more than 1 borrower is "joint and several", so you're left holding the ball if your friend decides not to pay. You could sue her, but you might never recover your $. And if you manage to keep the house even though she's not paying she's a 50% owner.

I think your best bet is to buy a property with 2 units in it. Then you could live apart enough to avoid common law issue (which I don't think really come up at all; not sure why they would, does anyone really know the law in this area?), but more important, if one of you decides to move you could rent the other unit out without changing the ownership status.

Another option is for one of you to buy the house and to have some sort of rent-to-own arrangement for the other. It's all a matter of making a reasonable deal that you can live with.

 

[antaeus]

Don't do it. Big mistake. The dynamics of friendship are unrelated to those of relationship or family. I have known 3 non-couples who bought houses as you describe and all ended in disaster, including 2 women-lawyers who did draft a contract and they were best friends who grew up and lived together.

If you do, my advice is this, based on alot of communal living (dormitories, residences, apartments, houses). Never, under any circumstance, regardless of provocation, criticize other roomate / house partner. It's difficult to swallow other people's behaviour at times, but it's the golden rule to friends' successful cohabitation. Couples have to criticize as part of open communication. Cohabiting friends who criticize each other will immediately start an irrevocable slide into uncomfortableness, retaliation, what the hell do I care mindset, and hatred.

Other's advice regarding contract, shotgun clause, is excellent. From my friends' experiences, I would add some what if scenarios.

 

[drlove]

Thank-you, everyone for the articulate responses to my post. It's only preliminary at this point; Just having discussions with her for now. My main concern, of course is making sure I don't get burned.

I agree that keeping a house for 15 to 25 years under this type of arrangement would be almost impossible. I was thinking more along the lines of perhaps doing it for a few years until market values rise, then turn around and sell for a profit. I could then take that money and invest, or put the money toward another house on my own.

 

[drlove]

Hmmm...