Anyone ever bought a house with friends?

[Bad324]

Myself and two of my friends who I've grown up with are highly considering going in together to purchase a cottage up in Marblehead or Catawba. The 3 of us are all close, have stable jobs and work together pretty well so I'm not too concerned about issues coming up as we all look at this as an investment into good times as well as possibly make some money in the end if we decide to sell.

My question is just so were all protected, what kind of steps should we take so nobody ends up getting screwed in the end?

[RFM]

Don't get married to any of them.

[Steve Butters]

bad idea! dont do it

[jblosser]

Did this almost 10 years ago.

Both deeds have everyone's name listed.

Had a real estate attorney draw up a property agreement showing:

--who owned what percentage of the property (each of the 4 had 25%, so it was easy in our instance)

--if one use of died, what happens to that person's share (it goes to either the spouse (which I don't have any longer) or the child - both couples have one child)

--what happens if someone wants out of their share (property to be appraised by two realtors, average those prices, divide by 4 (# of owners), that's what your share is worth and the other 3 will pay you that amount.

I've known the other couple a long time, best friends with the guy 33 years, known his wife longer than he has. No troubles there.

[Bad324]

Don't get married to any of them.

bad idea! dont do it

any particular reasons or horror stories?

[Bad324]

Did this almost 10 years ago.

Both deeds have everyone's name listed.

Had a real estate attorney draw up a property agreement showing:

--who owned what percentage of the property (each of the 4 had 25%, so it was easy in our instance)

--if one use of died, what happens to that person's share (it goes to either the spouse (which I don't have any longer) or the child - both couples have one child)

--what happens if someone wants out of their share (property to be appraised by two realtors, average those prices, divide by 4 (# of owners), that's what your share is worth and the other 3 will pay you that amount.

I've known the other couple a long time, best friends with the guy 33 years, known his wife longer than he has. No troubles there.

awesome this is what I like to hear and also good ideas for us to cover

[redkow97]

^ yeah, Jblosser's list covers the high points, but definitely consult an attorney.

Unfortunately, you really should EACH have your own attorney looking at whatever contract is drawn up, because you want someone looking out for YOUR interests. There is no such thing as an "attorney to the situation," and no single attorney can legitimately have all 4 of your best interests as his or her top priority.

You can save time (and money) by agreeing on most things in advance.

Like, what happens if 2 of you want to sell, and the other 2 don't?

what happens if 3 of you want to sell, and the 4th doesn't?

who determines the value of the house, if a percentage buy-out is agreed upon?

if you do decide to sell, do all of you have to agree on the selling price? 3/4? etc.

it can get VERY complicated, and the more you agree upon before such a situation arises, the more you're going to save yourself in future legal battles...

Really, the simplest thing to do might be to be to set this up as a business venture, with 3 partners.

1 of you owns the house, and the other 3 buy interest IN YOUR BUSINESS renting it. Then 1 person technically has total control over the house, but all 4 of you have an interest in the business, with its core (sole?) asset being the property.

Then the home owner is responsible for repairs, utilities, upkeep, etc.; but those all become business expenses which your partners will be responsible for contributing too, but can be written off when taxes are calculated.

[Beegreenstrings]

Yes,

Just have a plan up front and stick to it. Sign contracts if necessary.

Sell in the future to turn a profit, which is split equally. Upgrades have to be negotiated. if someone wants to buy the other out of the house, it is a per sale agreement and payment in full only.

Edited July 26, 2011 by Beegreenstrings

[redkow97]

Sign contracts if necessary.

No one ever enters a contract with the intention of disagreeing later on. There's no "if" about it.

Have a contract in place. I can't think of anyone I wouldn't hold to a contract in this kind of investment situation. That includes parents and siblings.

[Wicked1]

What happens when you need a new fridge? or carpeting? or want to re-do the windows? Who pays? Who chooses which design?

Sounds like a headache.... Why not just buy your own?

[Bad324]

What happens when you need a new fridge? or carpeting? or want to re-do the windows? Who pays? Who chooses which design?

Sounds like a headache.... Why not just buy your own?

Split whatever needs purchased equally. I'm an Excel nerd so I've already created a spreadsheet to cover costs and who owes or what not.

Were 3 single guys, the last thing I'm worried about is fights over designs lol.

I'd rather do it with others because its much, much cheaper and will be way more fun. Especially it being somewhat of a project, I'm lazy and would end up paying people to fix whatever needs done as opposed to grabbing a case of beer with my friends who share interest in the place to do the work ourselves. Not to mention it won't eat into my boat fund, which will be necessary to have up there

[redkow97]

I hope my posts aren't coming across as negative, I just think there's a lot that could go wrong.

If it works out, it will be a lot of fun. It's actually something I'd seriously consider myself, but my friends and I have different investment goals.

[Bad324]

I hope my posts aren't coming across as negative, I just think there's a lot that could go wrong.

If it works out, it will be a lot of fun. It's actually something I'd seriously consider myself, but my friends and I have different investment goals.

Not at all, I enjoy having every single side pointed out so there are no surprises which is why I asked in the first place.

I've known these guys literally since I was 2 yrs old, we've grown up together and have all lived together at some point. Right now our goals are all the same, invest in something that needs a little work that we can handle or at least learn to do from the ones dad who is an amazing handyman and not to mention already done this same thing back in the 90s when we were kids. We had a ton of fun at the place as kids and years later he doubled his investment.

We are at a point where we all agree, we just want it for the fun and learning and maybe make some money in the long run if we ever decide to get rid of it. All of us are 26, single with good jobs and job security so it makes sense for the 3 of us to do this together.

[crb]

I personally wouldn't do it. what happens if one of you can't work or loose a job? I know stable jobs right. What about getting sick and being off work for an extended period of time?

Are you planning on paying cash if so it might not be that bad.

If you are mortaging house can you afford the mortgage if the others are out of work? If so for how long? How will they repay you?

what happens if one guy lands in jail for a couple years?

I know you say that there won't be quibles over design ideas, but there will be. So which fridge do you get if one guy wants a bottom fridge, another a sideXside, and another wants a top fridge?

Too many things can go wrong in my opinion. If it works it could be great, but if it goes south it can get ugly.

[Wicked1]

In theory it sounds great- but I just see too many problems arising.

I guess if you feel comfortable putting that much of your hard earned $$$ up like that more power to you. Hopefully your buddies are as responsible as you and it all works out.

[Bad324]

I personally wouldn't do it. what happens if one of you can't work or loose a job? I know stable jobs right. What about getting sick and being off work for an extended period of time?

Are you planning on paying cash if so it might not be that bad.

If you are mortaging house can you afford the mortgage if the others are out of work? If so for how long? How will they repay you?

what happens if one guy lands in jail for a couple years?

I know you say that there won't be quibles over design ideas, but there will be. So which fridge do you get if one guy wants a bottom fridge, another a sideXside, and another wants a top fridge?

Too many things can go wrong in my opinion. If it works it could be great, but if it goes south it can get ugly.

I understand what you're saying, but this isn't a primary residence. This is a weekend summer place so I feel like that issue won't arise nearly as much. We are going to go with a mortgage simply because the rate we can get is ridiculously low and thus making the payments equal to that of a verizon iphone with unlimited data. With 3 of us we would just take 4 monthly payments....Person A: Jan, Apr, July Oct....Person B: Feb, May, August, Nov....Person C: March, June, September, December

Edited July 26, 2011 by Bad324

[crb]

Are all three of you going to be on the mortgage?

So the bank owns the cottage?

Low interest rate is good, but if somehow payments can't be made you will have a foreclosure on your credit report.

I would pay cash or not do it, that cash could come from a home equity line on your house, but no way in hell would I be tied into a mortgage with friends. NO WAY!

[Bad324]

Are all three of you going to be on the mortgage?

So the bank owns the cottage?

Low interest rate is good, but if somehow payments can't be made you will have a foreclosure on your credit report.

I would pay cash or not do it, that cash could come from a home equity line on your house, but no way in hell would I be tied into a mortgage with friends. NO WAY!

Yes

Yes

If something were to happen to one or both other parties, its completely possible for any one of us to take over sole responsibility of the financial aspects without foreclosing. I have a lot of friends I would never consider a venture like this but these two I have no issue with because of our history. Nobody is gonna throw a bitch fit over should we get cream or ivory colored appliances. Thankfully we all have testicles and all we care is that the fridge keeps our beer cold

[crb]

I wish you good luck in your venture!

I think your mind was made up before you posted this topic. I wasn't necessarily trying to sway you out of it I was only putting my opinions out there. I tend to truer nobody though I've been burned a time or two.

Edited July 26, 2011 by crb

[Bad324]

I wish you good luck in your venture!

I think your mind was made up before you posted this topic. I wasn't necessarily trying to sway you out of it I was only putting my opinions out there. I tend to truer nobody though I've been burned a time or two.

thanks! Were all set on doing it, its just taking into consideration of all the issues and angles that need covered which people are doing an excellent job of pointing out. Every concern has been added to an email so that we can discuss and have a proactive plan!

Thanks everyone, keep it coming

[Mykill]

Obvisouly if the payment is that low your all stable jobs, like each other and have a contract to cover everything then screw it. Get it and have fun.

[jporter12]

I know it sounds like the likelihood of things going bad is low, but if something would happen, you have to consider that it could strain, or even ruin the friendship.

[gen3flygirl]

If you end up going going ahead with this let me know. My family is from that area so I can help you find a good real estate agent and give you back stories on some of the properties, areas to stay away from, and any other goodies with the area.

[Bad324]

If you end up going going ahead with this let me know. My family is from that area so I can help you find a good real estate agent and give you back stories on some of the properties, areas to stay away from, and any other goodies with the area.

might as well hit me up with what you got...we've already set all the plans in motion

[redkow97]

yeah, the more I think about it, the more I think 1 person needs to hold a majority ownership in the house.

A "controlling stake" allows for quicker decisions, and it won't allow disputes to keep progress at a stand-still when they arise.

perhaps a mortgage with 33/33/33 ownership, but then create an LLC to make decisions on behalf of the house, and all 3 owners sign over control of important decisions (maintenance, etc.) to that company.

I'm not so pessimistic to assume that the friendships will degrade based on disputes over improvements and decorating, but I would worry about what happens when 1 person gets married, and their wife wants them to get rid of that "frat house" he bought with his friends.

If the other 2 of you can afford to buy him out, then it's all good. If not, then the only option is to sell, whether the other 2 of you want to or not.

As long as you all go in understanding that, then it should be fine.

the other potential scenario I see are "comfort" improvements. What if 2/3 want a $6,000 hot tub, but 1 guy can't or doesn't want to pony up his $2k?

The same could happen with any number of other luxury items (large TV, etc.).

I'm not saying you shouldn't do it, but build in a yearly "non-essential improvement budget," and either stick to it, or only deviate with unanimous agreement. Even then, it sets someone up to be teh bad guy. "well we WOULD have a 60 inch TV, but Chris wouldn't vote for it, so all we have is the 37 inch."

That kind of shit WILL get brought up for years - every time you watch TV.