Beyond the Handshake: How To Buy A Multi-Family With Friends


One of the ways many New Yorkers are dealing with the current and convergent COVID and rental crises is to come up with new ways to approach old problems. Some New Yorkers are opting to get out. After all, if your office is only going to ask you to come in once a week, why not see how far your money can go in Sullivan County?

But for others, leaving the city is just not an option. They want to be here through good and bad and raise families here. And one of the best ways to get around the exorbitant home prices and 20% down requirements of a condo is to pool money and buy a multi-family. But before you enter into this arrangement, it merits some real consideration and deliberation between all parties. Here are some things to keep in mind:

Yep, it can be done.

Co-buying is an achievable, if rare, goal. For one thing, your goals and your friends’ should align. Do they want the same neighborhood? The same pricepoint? Do they have the same understanding about who gets to use the backyard and when? It’s much easier to bang on the ceiling of the neighbor having a raucous 2 AM party than it might be to have a heart-to-heart with a friend about it. 

One of the ways to circumvent this discomfort might be surprising. It can sometimes work best with people you don’t know all that well. Think about it. Instead of trying to convince your spouse that your college roommate is trustworthy even if you don’t exactly know what he does for a living, you could reach out to a family you know through day care that you’ve heard wants to stay in the neighborhood. Similar goals can sometimes be more meaningful than old bonds. 

Get it in writing. 

It’s important that none of this is approached as a handshake deal. Everything should (and must) be negotiated and agreed upon ahead of time. You should absolutely hire an attorney to nail down the fine points and write up the agreement. 

And a discussion, no matter how potentially awkward, is better than trying to backtrack once certain power dynamics get established in the shared house. If someone isn’t up for going over the details with a fine-tooth comb, you may realize they’re not such a good match. They may even take themselves out of the running. 

Be transparent about money.

Finances and financing are key when co-buying, and all parties should be as transparent as possible about expectations, assets, and debts. It’s also important to share proof of your financial situation even if it feels weird. Remember, this is likely the biggest purchase any of you will be making anytime soon. It’s also an important step to agree on a set amount of money to contribute each month for general repairs to the structure that affect you both. You can think of it as being similar to co-op maintenance fees.

So let’s get down to logistics. One way people can buy property together is as a group of individuals, with all parties named on the mortgage, creating what’s known as a Tenants in Common agreement. Another route is to open an LLC and purchase the building through that entity—although your lender will still want to know the financial health of the individuals behind the LLC.

Not everyone needs to contribute equally—or own the same share or financial stake of the building—but if one person defaults on their agreed-upon payment, the other co-owners are responsible for making up the difference.  

Think about the hypotheticals.

Some things to establish before you purchase:

  1. Who lives where? Are any spaces shared?
  2. How will decisions be made? Should votes be unanimous? Should the person who owns a greater stake have more decision-making power?
  3. Who handles maintenance, especially of common areas?
  4. What about snow removal, lawn care (if applicable), trash hauling?
  5. Do renovations need to be agreed upon? 
  6. Are your lifestyles compatible? Is one unit a family and the other a single person who might stay up later or make more noise?
  7. Inevitably, what happens when one party wants to move? Do they have to be bought out? 

Working with a qualified agent during a tricky process like this is invaluable. If you have ever considered buying a multi-family with a friend or becoming a homeowner/landlord, let us know if we can be any help

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