Re:Some young people are buying houses with friends
by dragonwriter on Wednesday March 06, 2019 @07:37PM
(#19324547)
> I strongly recommend, if possible, to have a single homeowner and set everyone else up as renters.
If everyone is contributing to the downpayment and everyone wants to share in the risk/reward of appreciation, than your proposal doesn't work (and if only the first holds, setting all parties but one up as renters is problematic because then either much the downpayment is gifted to them, or exchanged for a claim against the property (and first right to lease is a claim), or it is lent by the “renters”), all of which have problems, including the fact that some are outright disqualifying for some loan programs.
Your proposal is exactly the right thing to do when one of the people is supplying the initial capital and everyone wants them to take the sole risk/reward of future market moves.
The logistical issues you raise are why you ideally want the group to form a separate legal entity to buy the house, have everyone rent from that entity, and have an appropriate ownership agreement for that entity as well as rental agreements, so that a deadbeat can be both evicted and have their ownership share of the controlling entity bought out; but that's probably an initial and ongoing cost more than you want for the purpose if it's just for a shared home.
If everyone is contributing to the downpayment and everyone wants to share in the risk/reward of appreciation, than your proposal doesn't work (and if only the first holds, setting all parties but one up as renters is problematic because then either much the downpayment is gifted to them, or exchanged for a claim against the property (and first right to lease is a claim), or it is lent by the “renters”), all of which have problems, including the fact that some are outright disqualifying for some loan programs.
Your proposal is exactly the right thing to do when one of the people is supplying the initial capital and everyone wants them to take the sole risk/reward of future market moves.
The logistical issues you raise are why you ideally want the group to form a separate legal entity to buy the house, have everyone rent from that entity, and have an appropriate ownership agreement for that entity as well as rental agreements, so that a deadbeat can be both evicted and have their ownership share of the controlling entity bought out; but that's probably an initial and ongoing cost more than you want for the purpose if it's just for a shared home.