Have you ever heard of co-buying a house?
As the housing market becomes increasingly unaffordable for middle-class families, and as rent is exploding, more and more Millennials are going into homeownership with their non-romantic friends. Sometimes it could be two people teaming up to buy a home; sometimes it’s three or more.
Last month, Amanda Scheider, who lives in Gallatin, Tennessee, in a home she bought with two other friends, told NBC News, “We split everything three ways, so it’s cheaper to live. If you have good friends, you have a lot in common and you can pretty much hang out whenever … it’s like a permanent sleepover.”
According to the real estate analytics firm Attom Data Solutions, the number of homes bought by people with different last names has increased by nearly 1,200 percent since 2010. That includes friends, roommates, or romantic couples who bought single-family homes and condos nationwide over that period.
The house-buying shift is the latest trend being established by people born between 1981 and 1996. Millennials are far more likely to live in the red (with the average debt hovering around $90,000). They are also less likely to get married or to have kids. Plus, 63% of millennials do not have money saved for a down payment on a home.
Throw into the mix a crazy and at times competitive housing market, and suddenly co-buying with friends seems more appealing than ever before.
Buying a home with another person has some obvious advantages in the mortgage department. With two incomes in the mix, buyers can likely qualify for a larger mortgage. However, if your best friend carries a lot of debt, has inconsistent income, or a low credit score, then it may make the buying process far more complicated.
There’s also the question of making payments. In a perfect world, splitting the mortgage and other costs of homeownership is great — but that’s only if your co-owner (and their income) can be relied upon. If one owner loses a job or otherwise can’t make their part of the payment, the responsibility would fall on the other. And if the payment’s missed altogether? It will hurt the credit score of both borrowers — not just the one with financial difficulties.
Logistically, co-buyers also need to agree on how the property will be maintained and what responsibilities fall on each party.
For those considering the idea, experts advise crafting a formal, written co-buying agreement that includes terms for various scenarios, including ending the arrangement or options to buy out a friend who chooses to leave.
Schneider told NBC News that she wished her group of friends took a crash course in maintenance and homeownership. The friends have spent an estimated $1,500 on renovations and still plan to update the kitchen and floors, which they anticipate will be costly. Even with the added expenses, the women said they don’t regret buying a home together and hope it will host their friendship for years to come.
“This is like the best living situation I’ve ever had,” Schneider said.