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January 20, 2009

Joint Purchase of 2-Family?

Hi all. We are looking to buy a 2 family, $850K to $1.1 million. We would like to puchase it jointly with trustworthy friend. I am wondering if anyone has any experience with this- is this possible? What are the restrictions/pros&cons?

Posted by ladybugNYC at 10:45 AM | Comments (23)
Categories: Real Estate

Comments

It's certainly possible. Do a search on tenancy in common. You're gonna want a real estate attorney regardless of how you plan to hold title, and it probably makes sense to look for one who has some experience with TIC.

Posted by: Bklnite at January 20, 2009 9:58 AM

If you have any friends in San Franciso, might be useful as it's VERY common there. Unfortunately seems less so here, and you'll get plenty of negativity here.

I did this myself (in SF 20 years ago) and iw was very smooth and simple. After 10 years bought out the other owner, the best thing I did as the place appreciated quite a bit in the next 5.

Posted by: cmu at January 20, 2009 11:12 AM

We bought our house with a lifelong friend a little over a year ago. The only thing that hasn't been mentioned already is that you may find that getting a mortgage with more than two people is tricky. We ended up just putting myself and our friend on the mortgage and all three of us on the deed.

Posted by: bunkerlabs at January 20, 2009 12:30 PM

Ok, sure its possible, but let me be the voice of reason here: if you can buy it on your own (or something else) do that instead. Obviously, I know nothing about you or your friend, but understand that there are a million and one things about the house that will come up that will severely test your friendship. Are your financial situations similar? Eventually, the issue of repairs, replacements, upgrades etc. will come up, and you will have to agree. Paint the dining room now or wait? Replace the water heater before it starts leaking? What happens if your friend hates the neighbors (or they hate him/her) and you like them? What happens if someone loses their job and can't make their half of the mortgage? Also, what happens when its time to sell? I've seen a friendship fall apart not because the two sides couldn't agree on a price, but because the side buying took forever to deal with getting a loan, and it caused some pretty serious inconvenience and hard feelings on the selling side. All this and more is in store for you - not saying don't do it, just be aware that owning a house together is a good way to start a disagreement and a difficult way to end one.

Posted by: slopenick at January 20, 2009 1:00 PM

I know of a house in Fort Greene that two young couples bought. I know the owners two or three owners ago who bought and renovated the house in the early 80's. They sold it in 1999 and it changed hands again just before the two couples bought it in 2008.

It was an owner's duplex with two floor-through apartments above. The house is being renovated and I think it's supposed to be two duplexes when it is finished. I'm not sure how they two couples arranged all this but I hear it was rather smooth. I was suprised when I initially heard two couples were buying one house but it seems like it worked out which, frankly, is heart-warming.

The house is in prime FG and sold for $1.9 million I believe. It sounds like a great way to by a house that may be a little too pricey for one couple to purchase alone. Buying together, two couples can spread the burden and not pay a premium to a developer.

Posted by: BrooklynGreene at January 20, 2009 1:10 PM

I would love to think that it's a good idea.

However, the one thing I truly, truly regret in my life is buying a home with a friend.

I would go into business with a friend again, I would buy a rental property with a friend...

...but people can get really emotional about their homes, and when people get emotional they make crazy decisions sometimes that you just would never in a million years expect or be able to anticipate. It can really blow you away.

Posted by: vanburenproud at January 20, 2009 1:19 PM

A. Smaller House.
B. Less Expensive Area.
C. Continue to pay Rent.
D. Move to San Fransisco.

Posted by: ou812 at January 20, 2009 1:19 PM

A. Smaller House.
B. Less Expensive Area.
C. Continue to pay Rent.
D. Move to San Francisco.

Posted by: ou812 at January 20, 2009 1:20 PM

"It's certainly possible. Do a search on tenancy in common. You're gonna want a real estate attorney regardless of how you plan to hold title, and it probably makes sense to look for one who has some experience with TIC."

THanks for suggestion, Bklnite. I am a bit green to this, so all input is welcome! Has anyone dealt with TIC? i.e.- restrictions? How does it work with taxes?

Posted by: ladybugNYC at January 20, 2009 1:28 PM

PROS and CONS...

"The house is in prime FG and sold for $1.9 million I believe. It sounds like a great way to by a house that may be a little too pricey for one couple to purchase alone. Buying together, two couples can spread the burden and not pay a premium to a developer." BrooklynGreene

My thoughts exactly. It is enticing to look at 2-fam in decent locations w/ 3 bdrm per apt & outdoor space! The "more for you money" ideal kicks in.

However...

"...but people can get really emotional about their homes, and when people get emotional they make crazy decisions sometimes that you just would never in a million years expect or be able to anticipate." vanburenproud

This is a valid point & worth considering. It is not a decision to be taken lightly. The mutual buyer is a responsible, reliable person that I would love to live close to. I think it's a case by case scenario... that fear is in the back of my mind, though.

Also, my partner is a little hesitant bc he feels it's a lateral move & will end up being like living in a co-op.

ou812- I would love an excuse to move to San Fran :)

Posted by: ladybugNYC at January 20, 2009 1:43 PM

You wanna remain friends? DON'T DO IT!!! Rent, save and wait. Prices will fall in half. BAM!!! The both of you's could then afford a whole brownstone each.

It's the wise choice.

***Bid half off peak comps***

Posted by: Brownstones Half Off at January 20, 2009 1:48 PM

1. San Francisco is beautiful but boring. It's a city of consumption. NYC is a city of production!

2. I guess all I can say is listen to your gut and do what your gut says. I probably should have seen the situation that developed before it happened, and I know that I had gut feelings that I rationalized away.

Posted by: vanburenproud at January 20, 2009 2:35 PM

I have a friend moving back to NY from SF because it's boring. That's a great comment about it being a city of consumption vs production. They do love to talk about the weather out there. 70 deg & sunny...

LadybugNYC, I would definitely consider the comments about the perils of buying real estate with a friend. I tried to do it and had a long friendship severely marred by the process. People really do get emotional when it comes to their home.

From what I can remember, condo-ing the building seemed to make the most sense to me after purchasing. I forget if coop or condo was easier/cheaper, but I think it is nearly a 2 year process and $40-$50K. You'll increase the value and untie yourself from your friend/partner. A good lawyer is important.

Posted by: latenight at January 20, 2009 3:11 PM

Heh heh SF is boring as sh** but certainly it is not sunny.

Posted by: mopar at January 20, 2009 4:33 PM

cmu, vbp, I also lived in SF. 12 years. But the food is better.

Posted by: mopar at January 20, 2009 4:36 PM

The food in SF is lovely, agreed. It can be very misty or very sunny from day to day, literally dependent on your neighborhood. You may live in a part of the Bay Area that is consistently hot and sunny while a mile away your friends call to say they haven't seen the sun in days and are shivering in the fog.

Posted by: BrooklynGreene at January 20, 2009 5:32 PM

If you do decide to go forward spell everything out in a legal document with your attorney. Set out how expenses are handled, how ownership is divided, some basic outlines for eventual sale and how often it can be considered. Anything you might disagree on in the future that you can think of. Having that on paper to refer to can make the whole process smoother and will help you stay

Posted by: bunkerlabs at January 20, 2009 7:11 PM

The Bay area is warm. SF is cold. Pacific-coast inversion.

Posted by: mopar at January 20, 2009 11:13 PM

Moper, parts of San Francisco are warm, others cold. If you're in the Sunset and call someone in the Mission at many times of day one will be cold and damp and the other hot and sunny.

Posted by: BrooklynGreene at January 21, 2009 11:13 AM

If you go forward, perhaps set up an entity to own the property - an llc for example - and have yourself and your friend be the members on 50/50 basis. The operating agreement for the llc should specifically set forth the terms and conditions of the arrangement, including, what the parties are responsible for on a day to day basis, cost and expense allocation, the conditions under which the property gets sold, and dispute resolution of there is a deadlock. In terms of financing, the rate on the mortgage will probably be a point or so higher, and the bank may request personal guarantees. You'll also get the benefit of deducting interest paymments if the llc elects to be taxed as a partnership.

Posted by: jnjnjn2 at January 21, 2009 3:49 PM

Something you may want to think about is cooping the building that way each of you is protected. you need a lawyer but if you create a Mutual housing association and the MHA buys the building then each of you are given shares to your rights and interest in the building.
I am in the process of purchasing a multi unit building with a few people this is the way we are going about it. we can not afford by our selves but as a group and as a MHA we can and then we will have a blanket mortgage.If i want to leave there are restrictions to sales but I sell my shares and a new person moves in nice and simple.
This is just an idea but its a legal process. I think group purchases is a smart way to provide an affordable option for urban living.
Not sure if its just the two of you but with the right legal paper work and open communication this sounds like a great idea.
You should just figure out what your both looking for. is this long term investment or something to flip when the market gets good again? make sure you are both on the same page.

Posted by: 646 at January 21, 2009 4:01 PM

These dumb ideas still propping up? In this environment? How much do you value your friendship because more than likely that'll end...

Posted by: cornerbodega at January 22, 2009 11:33 AM

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