Buying a duplex with a friend

5 Replies

Hey all,

First post here, I was looking into purchasing a duplex with a friend to live in, and then eventually to rent out down the road. We are both getting married within the year so we would be occupying the entire house. We have yet to try to get pre approved for a loan. I have no credit history because I have no school loans, my fiancé has a good credit history and I believe they do as well. Would the best route be for all of us to cosign on the loan, or try and do something creative. 

All that being said, we are open to renting for a while, but we want to build equity and eventually role over this potential property into an investment property for the future.

Thanks so much!

@Kevin F.  Since you guys don't own property already you should easily qualify for first time homeowner financing.  You can get a primary loan up to a 4 plex and it will help keep your down payment low.  Setting you up perfect to rent them out with great cash flow when your ready!

Partners are only good on the dance floor!!

@Kevin F. has hit the nail on the head.  I do most of my investing with a partner or two, but I'll spare you the details on why I do.  In this case, you are basically talking about house hacking- buying something to live in & renting out the other side.  I'm not a mortgage pro, but, since you will be an owner occupant you should be able to qualify for a lower down payment.  If I were you, I would buy the property your self and rent your friend the other side.  I don't think that I would want to live next door to my business partner if things got bad.  You may also want to consider going after a larger property, perhaps a 4 plex.

If you want to partner up with this friend, I would suggest a property that you don't live in.  I would also check with an account to see if there are any rules covering a property purchased for business that you & a business partner both live in.  

Best of luck.

How long have you known this friend? I can see this as a good idea and a horrible one. You should absolutely discuss what should happen if you get into a fight and end up not speaking to each other - stranger things have happened no matter how long you have known them.

It sounds like this would be a short-term living arrangement, and you would each own the half you started out with. I don't see that as a bad thing, with precautions taken to ensure amicable splitting down the road. 

I would definitely see an attorney to draw up some legal papers about this. You may never need them, and I hope you don't, but if you do need them, they were drawn up when you were friendly, and probably will be looking out for each other.

Good luck!

@Mindy Jensen We have known each other for 3 years. We have read a bit about Tennant in Common (TIC) Agreements and realize that we have to have something on paper and that the exit strategy is the most important aspect of this. Right now our goal is to hold this property long after we have moved out (purchase price of around 130k and currently rented out for 1680 a month). As we are in our early 20s this would be the beginning of our real estate portfolio.

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