As housing prices increase, some are opting to buy a home with a friend instead of a romantic partner.
According to a survey released by JW Surety Bonds earlier this year, 15% of Americans have co-purchased a home with someone other than their romantic partner, and another 48% said they would consider it.
In the survey, 67% of respondents said sharing costs was a perceived benefit of co-buying. A majority of respondents also said that affording a better home and investment opportunities were also perceived benefits of co-buying.
Between 2020 and 2022, the average sales price of a home in the U.S. jumped from $383,000 to $525,000, according to government statistics. Although housing prices have since dropped to about $513,000, interest rates remain elevated.
Niles Lichtenstein, CEO of Nestment, helps pool together buyers to purchase a home. He said there are questions to ask before embarking on such a commitment.
"In a lot of places, solo homeownership is just incredibly difficult, if not near impossible," he said. "We're coming at this from educated backgrounds, but actually co-buying is a very difficult, complex process, which is why we built what we built."
San Francisco resident Heath Schechinger decided to buy a home in 2021 with friends. Given San Francisco's notoriously expensive real estate, buying a home with friends allowed Schechinger to own a home in a city with a high cost of living.
"It's going well for us," he said. "We all wanted to own a home, but it wasn't financially accessible for us living in the Bay Area. Then when the pandemic hit, our work became more flexible and being able to work remotely, so we found a place a couple of hours outside of the Bay Area and created a plan and got some support in creating a plan and then we're able to purchase a home together."
Creating a plan
The survey noted, however, that 79% believed interpersonal conflict would be a potential drawback of co-buying a home. A majority also cited legal and financial complications and potential financial losses as other potential downsides.
Niles Lichtenstein agreed there are questions to ask before embarking on such a commitment.
"Usually what happens is we'd like people to go through a five-step process in terms of a road map of understanding," he said. "The first is around aligning on goals. Are your goals the same? Is it about cash flow? Is it about equity? Is it about lifestyle? Then financial projections. Understanding how you can actually build those financial projections. And our platform actually helps people do all of that because a lot of people don't love spreadsheets."
The next step, he says, is helping people through the legalities of co-buying a home.
"That's something that we spent a lot of time getting ready for folks, having the right financing and then having the right agents," Lichtenstein said. "All of those things are just a really important way to filter through the process. When it comes to traits itself, I think you tend to want to look for opportunities where you all have shared something before, like if someone still owes you for that Uber, that might not be the right person."
Schechinger said one important item his group created was an exit strategy in case someone wanted to leave.
"We had the advantages of having lived together for three or four years going into this and really got detailed and organized about what our agreements were, so we just really functioned in some ways as a family," he said.
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