Buying a Brownstone/Townhouse with friends?
We are considering looking into buying a brownstone or townhouse with friends. We’ve only started doing the preliminary research, but are looking for advice from those who have done this already. Is tenancy in common better than a coop/condo conversion? Is this a really bad idea for any number of legal/financial/personal reasons? Any advice would…
We are considering looking into buying a brownstone or townhouse with friends. We’ve only started doing the preliminary research, but are looking for advice from those who have done this already. Is tenancy in common better than a coop/condo conversion? Is this a really bad idea for any number of legal/financial/personal reasons? Any advice would be appreciated!
Everything works great in this kind of situation. Until it doesn’t.
I’m in a situation like this now, and it’s working great. A friend and I bought a four unit and had an agreement drawn up by a lawyer, and did a lot of initial construction to “equalize” each persons “share” of the house. We’re living in two and renting two and it’s possibly the best financial decision I’ve made — we each basically got two apartments for the price of one, and then customized them to exactly what we want, and now have great rental income.
I’m sure there are bad situations though. I just don’t think I would have gotten into one.
I wrote one of the negative comments–I said that doing this was the only thing I have ever regretted. I want to answer a few questions that have come up:
1. Like CMU, I also think that the level of distrust on Brownstoner is very high. I want you to know that do a lot of things that Brownstoners think is verboten… I illegally rent an apartment and I rent to friends, for example.
I wrote that post as someone who is comfortable with a high degree of risk, and who generally does not do things by the book. I have gotten burned a number of times, but I have also profited from my risky decisions. I tend to roll with what happens, and I don’t regret much. I wasn’t kidding when I said that it was the only decision I have ever regretted. It was so ugly, and it was in my house, and it cost me so much money.
2. The law can protect you and your investment, but it cannot protect you totally, nor can it protect your emotional investment in your friend.
3. Even after this horrible experience that took years out of my (and off of) my life, I do not believe in general that friends and finances should not mix. I do business with friends all the time, and I rent to friends.
Now that I have lost 75K and a once-best friend to a house, I endeavor to make all business dealings with friends as straightforward and bombproof as possible, with expectations clearly discussed up front and as much as is appropriate in writing. I protect myself better, and don’t depend on the friendship as protection. I think this benefits both my business and my friendships. Nobody likes a lack of clarity.
I would argue that this is nearly impossible to be as straightforward and all-seeing and pre-protective as you need to be when buying a house with a friend, particularly an older house in a market that is uniquely quirky, like Brooklyn’s. I think that there are too many surprises, hidden fees and decisions, and that the high cost has the potential to super-size the emotional content of each decision.
That said, I am sure that there are people who have gotten lucky with it, and are doing fine.
I wish you the best of luck whatever your decision may be.
Thank you all for your words of wisdom and experience. If we do choose to go down what seems like what could be a potentially fraught path, I will post an update… Thanks again!
I remember sitting with my friend of many years as our lawyer said, “Imagine the absolute worst things that could happen and cover yourself.” We laughed and professed our love and admiration for one another and said that we would be friends forever. A year and a half later a power struggle had started that resulted in a division of property and a nasty little error in the contract that f’d me out of a great deal of money. Never in a million years would I have guessed that my loyal friend would choose what was legal over what was moral. He went for it completely. It’s been 10 years and I still can’t believe that it happened. He was the nicest guy you could ever meet.
Both posts were by me. How it CA-specific?
There’s nothing significantly different about the interactions between owners, or real-estate laws, or other issues between CA and here…I am talking about people getting together for business, in this case the business happens to be a piece of real estate.
If one chooses not to believe facts, far be it from me to correct you.
I am however, beginning to see that the predominant sentiment here is to not trust anyone. Maybe that is a difference I have yet to accept.
I’ve purchased three pieces of property, one with family and two with friends over the past 6 years and my relationships with each partner have only gotten stronger. Of course I can’t say that will be your experience, but a frank discussion about the potential risks/rewards and a good written (and signed) agreement defining roles and addressing every conceiveable instance (one partner wants out early, one partner wants to buy out the other, etc. etc.) goes a long way towards creating a positive outcome.
The New York Times did an article on this topic in 2005-2006. It gave the pros and cons and talked to people who had done it and were happy and some who weren’t. I would search their archives and pay the $3.50 for the article.
And for my two cents, if you are going to buy a condo or coop, I don’t see how this is much worse as long as you get lawyers for each occupant to hammer out the details.. every imaginable detail
It’s definitely a risk, like any business partnership. Most people can’t do business with anyone, let alone their friends. It takes a really levelheaded, smart group of people to be able to keep their priorities in place and not let emotions, egos, personal issues get in the way.
I’ve done this a few times. Twice, I lost friends (I “learned what they were made of” so to speak), and three other times, I made my friendships way stronger. One of those times was a real estate partnership that’s still going strong.
It’s a challenge. Sometimes challenges are a good thing.