Rising home prices have made homeownership prohibitive for many across the county, and first-time buyers are turning to an alternative path to homeownership. That path is purchasing a property with a friend. (Photo: Gary Barnes/Pexels).


Duane Duggan, Realtor and Author RE/MAX of Boulder

In many housing markets, it is difficult to buy your first home. In Boulder County, this is certainly the case. Average home prices in the City of Boulder are now over $1 million, a pretty steep price for new homeowners. Rising home prices have made homeownership prohibitive for many across the county, and first-time buyers are turning to an alternative path to homeownership. That path is purchasing a property with a friend. This could be an alternative that works, but it isn’t the same as buying a home when you are a married couple or with members of your family, so there are several things to consider.

The first step is picking the person you’d like to own a home with. In my 40 years of being a REALTOR® and selling homes to combinations of friends, I’ve found that a crucial factor in this decision is choosing a friend of similar age who has similar goals for the property. A 25-year-old and a 50-year-old likely have quite different goals. Two 25-year-olds might find it much easier to establish a partnership because they are more likely to have the same vision and goal for the property. For instance, what happens when one of the partners is ready to get married and move on? Do you sell the property, or keep it as an investment? What happens if one of the partners dies? As you can see, you need to agree upon all of this in advance of your purchase.

The best way to solve and discuss the issues above, and more, is to consult an attorney. Most likely, the attorney can draft a Limited Liability Company (LLC) agreement or another form of ownership that the attorney might suggest. The LLC can lay out the ground rules for how the purchase and operations of the property will be arranged. For example, here are a few things you want to decide in advance of looking for a home:

• Will the down payment be split equally? If not will the percentage of ownership be different than 50/50?
• What name will the mortgage be in? One individual, both individuals, or an LLC? Most 1- to 4-unit lenders will not lend to an LLC.
• How will the title be held? Joint tenants or tenants in common?
• How will decisions be made for repairs, improvements, and replacements?
• How will utilities, maintenance, HOA, and insurance costs be handled?
• What is the process if a partner needs to exit the partnership?
• What happens if one of the partners dies?
• If both partners are ready to move on, do you keep the property as an investment or sell it?
• Are additional roommates allowed to live on the property to collect rent to help pay for the mortgage?
• What about pets?

The list could go on and on so it is important to discuss any potential disagreements and have them in writing so there are no hard feelings later on.

Once you decide on a friend and business partner, and it looks like you can agree on the items above, the whole process is similar to any other home purchase. The next step is to find a mortgage lender and see what you, your friend, and maybe even a third friend could collectively qualify for in terms of a mortgage. Once you know how much you can qualify for, you can pick a price range of homes to look at.

From my personal experience in selling homes to two singles, the ideal floor plan has been a townhome with two bedrooms for each person and two bathrooms, one on an upper level and another bath for guests. Obviously, everyone is different, but it is nice for each individual to have their own space. Kitchens, living rooms, and patios are easier to share than bedroom and bathroom space.

Buying a home with a friend or friends is like going into business and making big decisions together, but if you can agree on a vision for the home purchase and can come to a written agreement for how it will work, it can be the perfect solution to get started owning real estate. Contact your Realtor®, lending professional, and real estate attorney, and see if you can come up with a plan that works for you.

By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: The Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail [email protected], call 303.441.5611 or visit boulderco.com.