Is buying a home with a group of friends a good idea?
If you are in your 20s or 30s, buying a house might seem impossible. One way that it might become doable is if you purchase a home with a group of friends. This might seem like a good idea, but, there are many variables that make it a less than ideal situation.
So what are the advantages of buying a house with a group of your friends? Most importantly, you can all pool your money for a down payment. In addition, the house could be used as a residence or vacation home. Also, when not in use, the house could be rented out and used as a source of income.
Unfortunately, there are also many disadvantages to this type of arrangement. The home will likely have to be purchased in cash because it is very difficult for a group of three or more people to get a mortgage together. Also, any one of your friends that has bad credit could cause the mortgage rate to increase. You might think about leaving this friend off the loan, but then issues of ownership become confusing. Essentially, if added to the title, this person would have ownership rights but would not be legally responsible for the loan payments. As you can see, this is a less than perfect situation.
There is also a dilemma concerning how to structure the ownership of the home. Two options include ownership as tenants in common or as a limited liability company (LLC). Owning the property as tenants in common will allow you to name the owners, their shares and designate who should inherit from each stakeholder. As tenants in common, however, all of the owners would be exposed to personal liability should a debt arise. With ownership as a limited liability company, the stakeholders would be recognized, but would be sheltered from personal liability. An LLC would have to be set up as a separate entity according to state law. With ownership as a group, you will also have to consider what will happen if one owner wants out or becomes incapable of ownership.
Owning a home as a group might seem like a win-win situation until you get down to the details. If you are interested in the purchase of a residential property in this way or in any other, the experienced Albany, Troy, Saratoga Springs and Clifton Park real estate attorneys at Ianniello Anderson are here to assist you today.