Buying a Home with a Buddy

By
Real Estate Agent with Russ Lyon Sotheby's International Realty

Thinking of buying a vacation home with a friend? I already know what you’re going to say, “bad idea.” Well, it can be. But if you have your ducks in a row, you should be ok. I know at Russ Lyon Sotheby’s, there are plenty of vacation homes here in the Valley, including Paradise Valley and North Scottsdale. 

 

Before buying a home with a golf buddy, old college roommate, etc., work out all the details such as financing, expenses, and getaway time slots. Even more important, I know at Russ Lyon Sotheby’s, you should have a plan if one of you opts out. Failing to negotiate all these terms could lead to a great friendship turning sour. 

 

I read about one example where 30-year friends vacationed for years and then later with their families. They decided to buy a vacation house in California together. But before doing so, they drafted an “equity-share agreement” so there would be no conflicts. At Russ Lyon Sotheby’s, agreements like this are a good idea that spell out “monthly and annual expenses, such as property taxes, insurance, utility bills and repairs.” The equity-share agreement also details a plan if one of the friends decides to get out of the deal. 

 

FINANCING

Usually, buyers tap cash reserves or equity from their primary residence in order to buy a second home. The National Association of Realtors says 38% of vacation-home buyers paid cash last year, up from 30% in 2014. Paying cash definitely makes the purchase easier. 

 

Just like buying any home through Russ Lyon Sotheby’s, you should be prepared to put at least 20% down. Also, both buyers need to qualify based on income and debts. The bank will decide whether or not to lend money based on the person with the poorest credit score.

 

BEFORE YOU BUY

Before buying a home with a buddy, here are a few tips:

 

Keep emotion out of it. 

Even though your friends, treat it as a business deal. Negotiate all aspects of the home purchase.

 

Have an exit strategy.

Plan for worse case scenario. Decide what happens if one of you dies or wants out. Include a buy-sell agreement.

 

Keep purchase between friends.

Even though renting a vacation home when you’re not using it may seem like a good idea, it’s not. I know at Russ Lyon Sotheby’s that renting can cause a lot of problems in the friendship. It’s best to keep the house between the two of you. 

 

If you or anyone you know is interested in Scottsdale Real Estate, please check out my website, www.Realestateforsaleinaz.com, and I’ll be happy to help.

Comments (1)

MichelleCherie Carr Crowe .Just Call. 408-252-8900
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

I've known people to consider it-just don't know any that were successful.

Sep 21, 2016 04:15 PM