The Ultimate Guide to Co-Buying a House

“Ahh… if only I could live in the country on five acres and start an heirloom rutabaga farm with my three best friends and fellow ‘baga fanciers…”

“Silly Hoooman! You can’t afford to buy a HOUSE! No one will give you a loan! Who do you think you even are, all fancy with your ideas!”

“Someday I am going to be old, and I sure don’t want to be old AND alone, because that sounds like some bullshit.”

You think this, as you sit on your Craigslisted couch in the living room of the home you rent with your best friends. You love each other, you love living together. Well, guess what silly hoooomans… with your powers combined you and your chosen family can snatch that loan and get that house… together! People do it all the time, whether it’s a married couple, an investment group, or parents buying a house for their kids. How we live in and own homes is changing and we can tweak these tried-and-true forms and do more together than we ever could do alone. As a Realtor, a weirdo, a person who’s lived in community her entire adult life, I’ve seen folks flail in co-buying and go down in flaming lawsuits from hell, I’ve seen happy folks who have lived together delightfully for years, I’ve helped people buy and sell cooperatively and I’ve talked to TONS of folks who have had the co-buying dream.

I’m going to hook you up with some awesome tips to think Outside the White Picket Fence, hack homeownership, and make co-buying with your friends a reality. It has been done, it can be done, and YOU CAN DO IT!

As you read through these 10 steps, let one part of your mind dream about the magic of community, your ideals, and the deep friendships you’ll build while another part of you runs the financial numbers and keeps grounded in practicalities.

But before we get started, I’m going to lay some heavy vibes on you. Because as advantageous as shared home ownership can be, it takes work to make it successful, especially if you all plan to live together. It may be like, super duper neat-o lovely to have coffee with your friend and dream about all the delicious varieties of rutabagas you’re going to plant, but shit gets real when this much money is involved. YOU ARE HEREBY OFFICIALLY WARNED:

1. There will be conflict and disagreements.
2. You will have feelings.
3. You will have to work out compromises, so it makes good sense to do everything you can now to practice the skills it will take to work through future conflicts, disagreements, and differences of opinions together.

This can be a lot of emotional labor, but it’s worth it. Life is full of disagreements, difficulties, hard conversations. Why not get some equity out of it, and build better friendships while you’re at it? If you do nothing else, for the love of Glob, please talk to an attorney and get a legal agreement and an exit strategy.

Okay. The vibe killing is over. For now. If you’re still reading this… CONGRATULATIONS… You’re curious! You’re kooky? You’re desperate? Well, whatever you are, I have put this helpful guide together to help you find your way home. Go through these in any order you like. By the end of this article you’ll have a better idea of whether you want to co-buy, and some jumping off places to set yourselves up for success.

Ready… set… CO-BUY!

1. Rub your minds together & think strategically about what kind of home will best suit you all.

This is a really fun part! Consider the basics of buying a home. What location? What size? Price? How many bedrooms, yard size etc.? But think, too, about what kind of home will be best for living communally. You want to look for a space where you can create delightful common areas that encourage gathering together, but also have as much personal space as possible to retreat to when needed. My friend Gabrielle bought a crumbling duplex mansion in Cleveland with her husband, her housemate, and a friend. The spaciousness had its pluses and minuses. “I found in my house that lots more space meant less daily interaction and people started getting territorial about their “wing” or “my bathroom,” which never happened when we all had to use the same spaces constantly. Maybe this is just a communal mansion aka me problem, though? I do think it points toward a real need for gathering spaces that people want to enjoy together and regular need for friendly interaction to maintain goodwill and keep things working.”

Think about which qualities in a house would reduce stress and which would cause it. Might I strongly suggest a dishwasher and a whack ton of storage space? And maybe a huge fixer isn’t the thing to do, because fixing up houses is stressful as hell. Gabrielle’s crumbling mansion in Cleveland? Yeah, she and her husband own it on their own now and they are not on speaking terms with one of their former co-buyers. The house is real pretty, but getting it there was UGLY.

But anyway. I highly recommend looking at houses with an accessory dwelling unit (ADU) (aka a separate apartment), potential for an ADU, or a duplex (or triplex or fourplex) as this can give each of you all your own space, accommodate more co-buyers, or provide rental income. And boy howdy, it makes it a lot easier to live with someone else when you never have to fight about who did the dishes because you each have your own darn kitchen sink. Remember, though, look for those spaces that encourage casual, pleasant connection. Front porch? Big yard? Firepit?

Buying land and starting a commune (with or without the rutabagas) is a dream I hear about a lot. For all y’all looking to buy land in the country and build a zillion houses on it, there are a few things you should know. First of all, most banks and financial institutions don’t really like lending on land that doesn’t have a house on it. You would have to get a bare land loan, which often comes with a higher down payment and interest rate, and may require that you build within a certain amount of time, or a construction loan, which is doable, but a pain in the butt. Also, many jurisdictions have zoning laws that limit the number of homes that can be built on certain parcels of land. You can talk to someone at the local city or county planning and development department to learn more, or talk to an architect or land use planner. One great source — Mark Lakeman and the architects at Communitecture specialize in Outside the White Picket Fence developments around the country, and love thinking creatively about how folks can make their dreams work within the confines of local zoning and building codes.

2. Talk to a mortgage broker or financial planner.

If you’re planning on getting a mortgage, talking to a mortgage broker is the first thing you need to do. You want to know how much money you have to spend, individually and as a group. And there are some “mortgage preparedness” things that might be helpful to do well before you’re ready to purchase. Call that lender now! Stuff like improving your credit to X, paying down debts, or saving up just the right amount for a downpayment may not be something you need to wait years to do. A good lender will talk to all of you and help craft a long and short-term plan to meet your goal of home ownership. Talking to a lender is FREE, and clients who team up are frequently surprised with how quickly the question of “Can we buy a house?” turns into “Let’s write that offer!”

Some things ALL potential co-buyers should know about mortgage loans:

Credit Scores “One thing people don’t realize,” says Faith Watkins, a mortgage broker with Guild Mortgage in Portland, OR, “is that when we are working with a group of people on a mortgage, we base our approval on the person with the lowest credit score.” (Ps. Faith Watkins is a stellar example of the kind of mortgage broker you want. She is a wizard who looks at your entire financial picture. If you’re in Oregon or Washington, call her.)

In normal hoooman talk, that means that mortgage companies pull credit scores for everyone who wants to be on the loan, and rather than basing their decision on whether to give you a loan on an average of everyone’s score, they look at the lowest score.

Income & Debt The good news is, your lender WILL smoosh all of your income and all of your debts together, and use that number to determine how much house you can buy.

Co-buying Can Impact Future Purchasing Power. So, one thing lenders look at when they’re deciding whether to give someone a mortgage is how much debt they are responsible for, and they’re going to consider each of you to be potentially responsible for your entire mortgage payment. Let’s say you and your three best friends all buy a house together, and the monthly payment is $2000. When you decide you want to buy another house, your lender isn’t going to say “oh, you bought with 4 other people, so you are responsible for $500 of monthly debt.” They’re going to say “In all likelihood you are the only responsible person here and the rest of these silly hooomans are too deep into their future careers as tik-tok artisinal shell jewelry diy influencers to have any money, so we are assuming you have to pay $2000 a month.” In other words, it could be harder for you to make that next purchase while remaining on your co-buy loan.

It’s hard for an LLC to get a loan. That seems like a great ownership structure for many co-buyers, but it’s much harder for an LLC to get a loan than a group of individuals. You have to have a larger down payment, and the lender is going to hold you each individually responsible anyway.

Lenders won’t let you tag someone else into a loan. You can’t buy and sell shares of a loan to others. If anyone in your group decides they don’t want to be on the loan anymore, they want out of the project because they want to start a Breatharian Cult, the only way to get them out and to bring someone else in is to get a whole new loan. And who knows what will be going on then. Maybe interest rates will be at 16% like they were in the 80s. Okay, that’s unlikely. Maybe your artisanal shell business isn’t doing as good as it was, and you can’t qualify for the new loan. This is why you need a very very beautiful exit strategy. Or cold hard cash.

Speaking of which, buying your house with COLD HARD CASH does open up possibilities, and makes it easier for everyone to enter or exit the arrangement. Talk to a financial planner and an attorney about making cash purchases, and how to split up the money and all that good stuff.

Let me tell you a little story about co-buying & loans:

Once upon a time, in a galaxy not so far away, there was a crew named Alex, Felicia, and Winter who were best buddies and dreamed of a compound near the city where they could grow old together and eat rutabagas every night. When Alex was in his 20s, he didn’t have the capability of paying down a large credit card bill. Now this was back in the day when the empire would give anyone with a pulse a credit card, but of course no credit education, so he racked up a huge amount of debt, couldn’t pay it back, and his score is like 540. Felicia is a Type A “Right Brain” whose family had put her on their credit card as an additional signer when she was 16 years old, and her credit score is 789. Winter loves Target, got a Target credit card, was pretty good at paying off the balance but not always, and their credit score 720. In their story, the bank isn’t going to add 789, 720, and 540 together and use the average of 683. The bank is going to use 540. And they’re going to say “No, you cannot haz loan, not by the hair on our chinny $ing $ing!” In this case, they might NOT want to have Alex on the loan, but of course that doesn’t mean they all can’t still have a Happily Ever After together in shared home commune-ity! Why? Because they are smart people who listen very closely to their nice friend AnnieRose and they talk to a lawyer about how to make sure Alex can still contribute to the purchase and have some legal rights too.

Don’t forget about income smooshing, though! That means that if Alex makes $25,000 a year, Felicia makes $50,000 and Winter makes $75,000, the lender will base their feelings about your income on $150,000 a year. Your powers combined…!

Hey, you, over there. First time homebuyer. Don’t be so sure that you can’t afford it!

Many of my clients go into their pre-approval process assuming they can’t purchase anything. For example, my friend Lauren works as a Montessori pre-school teacher and was sure she couldn’t get a loan — turns out she qualified for up to $400,000. There are programs out there for homebuyers with low incomes including opportunities for down payment assistance. If you’re not able to get as large of a loan as you’d like right now, a good mortgage broker will help you and your friends make a plan to get there.

Ask your Realtor and friends for recommendations of local mortgage brokers. Try to avoid working with big banks or online lenders. (Their customer service can be hellish!) Find a mortgage broker who will give you their cell number and is available after business hours. This can be key when putting a real estate offer together, when thinking outside the box and flexibility at crunch time are key.

3. Take serious time to get to know each other, and talk to lots of people about your co-buying dreams.

With this much money and commitment involved, you and your potential co-buyer(s) need to get to know each other really well. You will want to build a close and trusting relationship while keeping in mind that it might not be a good fit for you all. By determining this early on you can save yourself a great deal of unhappiness later.

If you are co-buying with more than one individual a round-table discussion might be the way to go. Here are some GUIDING QUESTIONS:

• What does home mean to you?
• How do you each deal with stress?
• How do you handle money?
• What are your communication styles? (Tip: Best practices for successful co-homeownership should include direct communication about issues using strategy and solution-focused, non-passive/aggressive, conversations that will not be taken as personally critical.)
• What are you most excited about for your future home?
• What do you value most in a housemate?
• What drives you crazy about living with other people? What do you love about living with other people?
• What are deal-breakers for you?
• How long do you want to live in a co-bought home? How much money or work do you want to put into your home?
• What are your future life plans? Do you want to have kids? Have your mother move in with you when she’s old? Live with a partner?

I also encourage you to talk to lots of people about the possibility. Create an ecosystem of potential co-buyers, and make sure they know each other. I’m helping a group of folks purchase a retreat center on 20 acres right now, and the deal almost fell apart because two of the initial three co-buyers didn’t feel comfortable committing to the amount of work it would take to make this place all it could be. But because my client had been talking to friends about co-buying for years, she was able to pull in two other people, and the deal is still going. The one thing you won’t know about until you get there is the land and the property itself. It may speak more to some people than others, and having an ecosystem of potential co-buyers will give you the flexibility to work with what’s there. You’ll also be helping advance the potential for collaborative real estate purchases throughout your community.

Keep talking! And talking. That friend you’ve had a serious disagreement with and have navigated through it lovingly? That’s the friend to co-buy with. Live together for a while. Do some hard projects together. Find compromises. And agree ahead of time that it’s okay if it’s not a fit. Value your friendship more than the idea of co-buying.

4. Connect with a real estate agent.

We Realtors are your key guide to home buying. Our job is to educate you, answer your questions, and be the expert you need. We want to help! If your Realtor thinks you’re coo-coo bananapants for wanting to purchase with friends, send them this article or look for someone else.

Touring houses with a Realtor is an excellent way to continue exploring what kind of home will work best for you. The physical experience of being in a home will help you expand your intuitive sense of what home means, and refine your list of must-haves, deal breakers, and compromises. Find a Realtor who thinks outside the “traditional” ideas of home, family and community, and understands the needs of unrelated adults who are buying together. If you’re near Portland, Oregon, schedule a one hour meeting with me and let’s get the ball rolling! (Shameless plug: if you’d like to buy or sell a house normal style, please be in touch too. The less complicated jobs give me the financial stability to put the extra work into co-buying!)

Most Realtors will ask that clients have a pre-approval letter from a mortgage broker or have funds for a cash purchase before showing homes. But you and your crew can begin interviewing Realtors right away! And don’t be shy about asking for advice and recommendations for mortgage brokers, attorneys, contractors, you name it. Accessory Dwelling Unit specialists, or those who specialize in multi-generational living are good folks to start with. Oh, and queer Realtors, lenders, attorneys, etc., are more likely to be familiar with helping unmarried adults purchase together. Because, you know, we weren’t allowed to get legally married until, like, the year 2015 (because what the actual heck, America?), but if you have ever been to Palm Springs there can be no doubt in your mind that we’ve been buying houses together forever. Ask for Realtor recommendations from community members who live communally or multi-generationally. Fun fact: in most parts of the country Realtors are paid through a commission split with the Seller’s Realtor. That means if you’re the buyer, our services are free for you. How cool is that?

5. Think about house norms and the roles you want to play.

Write it all down. What you think you need now will change over time, so create ground rules, but make this a flexible document. Here are some good GUIDING QUESTIONS:

• What do you want your home to be like?
• What will quiet hours be?
• What’s your subletting policy? Your rental policy? How about having partners over, or them moving in? Houseguest policy?
• What about pets?
• How do you plan to deal with conflict when it comes up?
• How are you going to divide the responsibilities of owning a house? Is one of you better at getting the bills paid on time? Is one of you more handy with repairs? One of the benefits of buying together is that you can share the work involved with homeownership. Take advantage of it!

6. Plan to have regular house meetings and continue to invest in your relationships.

Have house meetings at least every 6 weeks. Getting together for regular check-ins and work parties is fun, and makes it easier to address problems or make tweaks in how you live together before they become volcanoes of vitriol. If you don’t want to spend three months stewing about how annoying it is that your co-owner leaves their laundry in the dryer forever, have meetings regularly.

Don’t be afraid to engage a mediator, counselor, therapist, or other relationship expert from the beginning. This isn’t “we have problems” this is being smart from the start, and utilizing the skills of someone who has gone to school for a very long time to help people get along and succeed. Budget to consult with them throughout your time together as co-owners as an act of maintenance and care. Who knows, maybe you’ll grow and change and expand and all that groovy stuff while you’re at it. Take it from someone who has been through it with a lot of clients, the idea of home brings up soooo many complex feelings.

Make a conscious effort to maintain your relationships. It’s easy to take each other for granted when you live together. It’s all about the PLERK!!! (Play + Work = PLERK!) Listening to Abba and weeding the garden in silly sun dresses and PLERK the crap out that YARDEN!

7. Put on your Big Girl panties, HIRE A LAWYER AND MAKE A LEGAL AGREEMENT AND AN EXIT STRATEGY. PLEASE. Pretty please?

If you only do one thing, do this. I promise you will thank me later. Why? Well, remember when all us queers wanted to be allowed to get legally married? One of the reasons is that there are a lot of legal protections for married couples, including when it comes to selling a home owned by two folks who are wed to each other. When you are three unmarried people on the title of a house, unless you have another legal agreement in place, any one of you can demand that the house be sold at any time. That is NOT a good recipe for long term house happiness! So get an attorney before you purchase and get yourself a beautiful legal agreement.

Exit strategy! Nobody wants to think about breaking up the band, but look at how bad it was for Van Halen. What if they had all sat down together ahead of time and teased their hair and thought about how they would lovingly call it quits? A time will come when you and your co-buyers may want to part ways, either by dissolving the financial arrangement or even just moving out of the house. Think about these possibilities now, and save yourself a ton of stress and money later. You may also want to consider any unexpected future developments. What happens if one of you loses your job and can’t pay your portion of the mortgage? What happens if your family situation changes and you want to move out? What happens if one of you JUST WON’T STOP TALKING ABOUT CAPYBARAS and no one can stand to live with that person anymore. I mean, legit, capybaras are freaking cool, just look at how big and weird they are! Having an agreement ahead of time is better than popping a valium every time you get into a fight with your landmate and worrying about whether you have to move into your mom’s moldy basement.

Hire a lawyer familiar with creating contracts for collaborative enterprises. Real estate attorneys are the obvious go-to, but attorneys who work with bands and artistic collaborations and family law attorneys who do pre-nuptials could also be helpful, and look for attorneys who serve queer communities. You want someone who knows how to write a solid real estate contract that investors would use, and one that takes into account the messiness of being human. They should be able to help you plan for future scenarios you might not know to think about. They can also help you decide whether you can or should create a legal entity to own or manage the house.

A few things to think about for your legal agreement:

• If you are bringing different amounts to the initial purchase, will one of you be repaid by the other over time? And/or will this be repaid if you sell the house? How will you divide any profits you make from selling the house? No, trading your Albo Monstera houseplant will not suffice as just compensation! (Or would it??) What happens if you lose money in the sale?
• What will your rental policy be? How will you divide up the income?
• How long do you plan to own the home together? Under what circumstances will you sell it? It’s not a bad idea to agree ahead of time to sell the house in 5 or 10 years, or determine the conditions that would trigger an evaluation of whether to sell, and whether it takes just one person or mutual agreement to sell. The vast majority of mortgage loans don’t allow you to sell your portion of the mortgage loan to someone else to get out of the deal financially, so you’ll need to plan around this. Your mortgage broker will explain the mortgage part in greater detail and your attorney will give you options on how to plan out your separation.

Get a lawyer, get a good contract together, and make it legally binding.

If you only do one thing, write out your exit strategy!

8. Establish budgets, expenses, and profits.

Homeownership has its costs, and there are some additional ones when co-buying.

Purchase Costs:

• Create a budget for a lawyer. LAWYER UP, RANGERS! The cost could be anywhere from $500 to a few thousand dollars, depending on the complexity of your situation.
• Chat with your mortgage broker about what your down payment and closing costs will be. Talk to your Realtor about inspection fees, any potential fees to bring contractors in for evaluation, or other costs.

Repairs & Upgrades:

• GET THEE TO A CONTRACTOR and get some bids. Are there immediate repairs? How much can you spend on repairs and upgrades in the first year of ownership? Some will be critical and others will be cosmetic. Maybe she’s born with it, maybe it’s dry rot! Make sure you bring in contractors for repair bids during your home inspection period.. **Pro tip: prioritize critical repairs — those that could effect the structural integrity of your home or your safety. Contractors usually add 10% to any cost projection for a project, and you should do the same. You can begin researching deals now too. Scratch and dent water heaters are the way to go! After all, we’re all a little scratched and dented — but we’re mostly functional. (Mostly???)
• DOES YOU HOUSE NEED A CATIO (cat patio, duh). How about a dishwasher? Consider structures, systems, and attributes of your house that will reduce stress aka quality of life improvements. As co-owners who are joined in a long term financial commitment, anything you can do to reduce the everyday stress of living with another person is GOLDEN. Get that dishwasher, for reals. A drip irrigation system for the yard. Put french doors in the bedrooms so you can each have a private exit. I know of a few collective houses that have even hired regular house cleaners!

Long Term Budget:

• Talk to your mortgage broker about what your monthly payments will be.
• Put money into a reserve each month for regularly recurring costs like utilities and monthly all night ragers with free keg stands for all. Create a flexible reserve for repairs and maintenance items that come up, and build up a more untouchable reserve that includes contributions for emergency repairs. Ideally, have each co-buyer create a reserve of a couple of months of payments in case of a loss of income. TEFLON PIGGY BANK, BABY!
• Save for fun things — plants for a beautiful garden, a yearly party, art for the walls. It doesn’t have to be expensive, but if there’s something spendy you’ve always wanted, treat yourselves. Budgeting in delight will keep you loving where you live and who you live with and it deserves as much consideration as repairs. I saved up and got a slightly busted used hot tub and it is the best thing ever.

9. Dream!

What can you do together that you could never do alone? What are you excited about? What kind of community do you want to create?

Plan to plant some trees, since you’ll be here long enough to watch them grow. Decide your house will become famous for incredible annual Halloween parties. Host a monthly potluck, now that you have enough room. Build a bike shed and never have to lug your bicycle up another flight of apartment stairs again! Get that rutabaga farm going! Think about where your live-in caretaker will stay when you all become wise crones together?

You’re breaking ground, and you’re making magic. Enjoy the possibilities, make the dream a reality!

10. BONUS: YOU’VE GOT THIS!

Folks have been buying together for forever. You can do this. It may feel new, it may feel more complicated, but it can be done! Assemble your team of professionals, get into the deep work, and rock it!

Want to run your ideas past me? Schedule a digital coffee date with me.

https://calendly.com/outsidethewhitepicketfence/co-buying-digital-coffee-brainstorming

What’s your co-buying dream? Tell me in the comments!

TL:DR

• Co-ownership can be a comfortable way to build wealth and housing security.
• Co-ownership affords the opportunity to establish a chosen community of care not based around the traditional idea of a nuclear family.
• Put on your Big Girl Panties and get a lawyer to help you write up an exit strategy.
• Feelings. There will be feelings.
• Talk to a mortgage broker unless you are a scarecrow made out of 1000 dollar bills.Your Fully Automated Luxury Gay Space Communism dreams may be closer than you think! Hot tub party ahoy! Invite me, I’ll bring ______ (insert taboo substance here).

This article was produced by Sean Brochin. Special thanks to Joanna Richards, Kelcy King, Simon Harris, Matsanduno Law, and my Mom for help with editing and research.