{"id":181816,"date":"2025-03-27T07:35:39","date_gmt":"2025-03-27T13:35:39","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=181816"},"modified":"2025-03-27T07:38:33","modified_gmt":"2025-03-27T13:38:33","slug":"co-buying-is-a-fast-but-risky-way-to-invest","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/co-buying-is-a-fast-but-risky-way-to-invest","title":{"rendered":"Why Co-Buying is a Fast But Risky Investment Strategy"},"content":{"rendered":"\n

Buying real estate with friends or business partners often seems like a good idea, but it can be an exasperating experience when it goes wrong. With homeownership and investing becoming increasingly <\/span>difficult<\/span> amid high interest rates and property prices, more people are turning to \u201cfriends with benefits\u201d to get on the property ladder.<\/span><\/p>\n\n\n\n

According to the<\/span> National Association of Realtors<\/span><\/a>, the average age of first-time homebuyers has increased from 35 to 38 over the last year. <\/span>NAR data shows that first-time buyers had a median household income of $97,000, up from $95,900 the prior year <\/span>and reflecting<\/span> an increase of $26,000 in the last two years.<\/span> Repeat buyers had a median household income of $114,300, up from $111,700 the previous year. <\/span><\/p>\n\n\n\n

It\u2019s important to remember that those numbers represent a national demographic. Buying is even more prohibitive in pricier neighborhoods.<\/span><\/p>\n\n\n\n

Co-Buyers Make Up 30% of U.S. Home <\/span>Sales<\/span><\/h2>\n\n\n\n

According to<\/span> cobuy.io<\/span><\/a>, a specialized app that helps co-buyers with documents and information for a $270 flat fee, co-buyers today make up 30% of all U.S. home sales.<\/span><\/p>\n\n\n\n

Half the co-buyers in 2024 bought with a spouse or partner, 9% <\/span>bought<\/span> with a relative, and 7% with a friend<\/span>, per<\/span> Zillow<\/span><\/a> research<\/span>.<\/span> The overriding reason people co-bought houses was financial. According to <\/span>Bankrate’s 2024 Down Payment Survey<\/span><\/a>, over 50% of respondents said that finding the <\/span>cash for a down payment<\/span><\/a> was out of reach. <\/span><\/p>\n\n\n\n

“We became co-owners of a brownstone in New York with three friends, where we still live,” Nick Allardice, 38, who co-bought his home with friends in 2021, told<\/span> Business Insider<\/span><\/a><\/em>. \u201cThe brownstone was easier for us all to afford because we pulled together and saved on all the<\/span> costs associated with buying a property<\/span><\/a>.\u201d<\/span><\/p>\n\n\n\n

\u201cThere’s been a ripple effect, too,\u201d Allardice continued. \u201cIn 2022, three other friends replicated our <\/span>exact<\/span> model a few blocks away in their <\/span>own<\/span> three-unit brownstone.\u201d<\/span><\/p>\n\n\n\n

Non-Spousal Co-Buying Is on the Rise<\/span><\/h2>\n\n\n\n

Unsurprisingly, co-buying is most common in pricier states such as New York, California, and Washington. Non-spousal co-buying is <\/span>particularly<\/span> on the rise in these states.<\/span> Co-buy.io<\/span><\/a> and<\/span> Nestment.com<\/span><\/a> focus on helping buyers navigate this arrangement’s legal and logistical aspects.<\/span><\/p>\n\n\n\n

“For the past 50 years, property prices have way outpaced wage growth, and that’s created <\/span>an incredibly large<\/span> gap,” Nestment founder Niles Lichtenstein told<\/span> CBS News<\/span><\/a>.<\/span><\/p>\n\n\n\n

Though co-buying has some similarities to syndication, co-buying usually applies to small <\/span>multifamilies<\/span><\/a> (of two to four units) or sometimes larger single-family homes with multiple floors, and more buyers are generally on an equal footing investment-wise, putting these properties in a class by themselves.<\/span><\/p>\n\n\n\n

“It was important that everybody understood we were not roommates, but had two distinct units connected in a home,” Harlem, New York, brownstone co-buyer Claire Breedlove told the<\/span> New York Times<\/span><\/a><\/em>. “We plan to live as neighbors, not roommates.” She and her co-buyer and friend, Charlotte Renfield-Miller, invested in a two-family brownstone that was a former art gallery and cost $2.795 million, with annual taxes of about $8,500.<\/span><\/p>\n\n\n\n

“We tend to see eye to eye, but we wanted some sort of legal structure to <\/span>make sure<\/span> our friendship was never going to suffer because of a co-purchase,”  Renfield-Miller explained.<\/span><\/p>\n\n\n\n

The agreement covered future possibilities, such as one person wanting to move or sell. “If anything does arise, we already know <\/span>what the plan is<\/span> without having to come up with it on the spot,” Renfield-Miller said.<\/span><\/p>\n\n\n\n

Advantages of Co-owning Investment Properties<\/span><\/h2>\n\n\n\n