Should Friends Buy a House Together?
A reader recently reached out with a unique situation. They and their childhood best friend are considering moving to North Carolina and buying a home together. The idea is to purchase something they could fix up, live in for a few years, and then either sell or rent for profit. Another option they mentioned was that one of them might buy out the other when the time comes to move on. They were not asking me whether this is a good idea. They already admitted they know it might not be. Instead, they asked what my recommendations would be if they decide to move forward with friends buying a home together.
Why Buying with a Friend is Like Going into Business
Even though this might feel like a personal arrangement, the reality is that friends buying a home together is a business venture. Since they are not married, there are no built-in protections if something goes wrong. That means they need to treat this as a partnership and approach it with clear agreements and legal documentation.
First Step: Talk to a Real Estate Attorney
Before anything else, I recommended they hire attorneys. In fact, it may be wise for each of them to hire separate attorneys who can represent their individual interests. Yes, this will cost money, but considering the size of the investment, it is worth it. An attorney can draft a written agreement that protects both parties and provides a roadmap for different scenarios in the future.
Hammering Out the Business Terms
Before involving attorneys, though, they need to have some honest conversations about the business terms of their arrangement. Some of the most important questions include when friends are buying a home together:
- How much can each person afford to contribute toward the purchase?
- Will they split ownership evenly, or will it be 70–30 or another ratio?
- How much will each person contribute to the down payment?
- If they plan to fix up the home, who is contributing money, who is contributing labor, or are they both doing both?
- How will they handle situations where one person works more hours on the property than the other?
These conversations may be uncomfortable, but they are necessary to avoid bigger issues later.
Planning for the Exit
No matter how good the friendship is, the day will come when they need to move on. They need to discuss now how those decisions will be made.
- If one wants to sell and the other wants to rent, how do they decide which path to take?
- If they choose to sell, how do they agree on a listing price and process?
- If one wants to sell and the other does not, what happens then?
- If one wants to buy out the other, how will the buyout price be determined? Will they use an appraisal? Will the buying partner refinance the mortgage?
The unknowns of the future make it even more important to address these questions in advance.
What If They Become Landlords?
If the plan is to rent the home down the road, that comes with its own set of challenges. They need to decide:
- Who will manage the property?
- How will maintenance be handled?
- How will they divide the responsibilities and profits?
The Value of Putting It in Writing
Once they work through these questions, the next step is to have attorneys draft a legal agreement. This will give both parties peace of mind and ensure they are on the same page if things get complicated in the future.
Final Thoughts
Buying a house with a friend can feel like a fun adventure, but it is really a business arrangement that requires careful planning. My advice is to have the hard conversations now, put everything in writing, and let attorneys handle the formal agreement. Doing this might even reveal that the idea is not the right fit after all. Or, it may give both friends confidence that they can move forward with a clear plan in place.
Either way, the work they do up front will make their friendship and their investment much stronger.
Thinking About Buying a Home With a Friend
If you are considering buying property with a friend or have questions about how to protect yourself in the process, feel free to reach out to me. I am always happy to answer questions and I can also connect you with a trusted real estate professional who can guide you through buying or selling with confidence.
