Pooling resources with friends or partners for homeownership is popular but comes with financial and legal risks. Let’s hear it from Kelli through this guide covering key considerations and how to plan.
For younger generations locked out of traditional homeownership, pooling resources with friends or partners has become an increasingly attractive way to get a foot on the property ladder. Rising home prices, stagnant wages, and higher interest rates have made it difficult for many to buy on their own, leading to an uptick in interest toward alternative ownership arrangements.
But while buying a home with a friend or an unmarried partner might seem like an obvious solution, co-ownership is a serious financial and legal commitment. Unlike married couples, who can rely on divorce courts to settle disputes, friends and non-spouses who purchase property together have no built-in legal framework to help them if things go south. The result? A well-intentioned plan to share homeownership can quickly turn into a complicated—and costly—mess.
For those still interested in exploring real estate co-ownership, consulting an attorney prior to entering into a purchase agreement is key to ensuring that all bases are covered and the important details are considered such as:
Joint Tenancy vs. Tenancy in Common
There are two primary legal structures for co-ownership: joint tenancy and tenancy in common.
- Joint tenancy comes with the right of survivorship, meaning that if one owner dies, their share automatically transfers to the other owner. This structure is more common for married couples but can be used by friends or unmarried partners as well.
- Tenancy in common allows co-owners to hold different ownership percentages and to pass down their share to heirs or an estate rather than the other co-owner.
While tenancy in common offers more flexibility, both structures require careful planning. If one person wants out—or faces an unexpected life event, like a marriage, job relocation, or financial hardship—the remaining owner(s) may find themselves in a difficult position.
To mitigate some of these risks, many co-owners create a buy/sell agreement outlining how the parties will share responsibilities like mortgage payments, maintenance, and property taxes. These agreements should also establish a process for what happens when one owner wants to sell, including a buyout option for the remaining owner.
However, even the most carefully crafted contract has limitations. A contract is only as good as the ability of the parties to enforce it. If one co-owner wants out but the other can’t afford to buy them out—or worse, refuses to sell—the only recourse may be legal action. And if pooling resources was necessary to buy the home in the first place, the parties may not have the financial means to take the dispute to court.
Accounting for Unpredictability
Beyond personal disputes, real estate is inherently unpredictable. No contract can account for every possible market fluctuation, job loss, or economic crisis. The 2008 housing crash, for example, left many co-owners in financial ruin, unable to sell their properties for enough to pay off their mortgages. Even in less extreme cases, refinancing can be a challenge—especially in today’s high-interest rate environment. If one co-owner wants to exit, the remaining owner must be able to refinance the mortgage to remove them from financial liability. But with interest rates significantly higher than they were just a few years ago, refinancing might be unaffordable.
Co-ownership also comes with emotional and relational risks. Money complicates relationships, and disagreements over home-related expenses, maintenance, or selling decisions can strain even the strongest friendships. In many ways, buying a home together is more like going into business than sharing an apartment lease.
The Bottom Line: Plan for the Worst
Buying a home with a friend or partner can be a smart financial move, but it’s not one to be taken lightly. Before signing anything, prospective co-owners should:
- Choose the right ownership structure – Decide between joint tenancy and tenancy in common based on long-term goals.
- Create a detailed co-ownership agreement – With the help of a lawyer, outline responsibilities for mortgage payments, maintenance, and what happens if one owner wants to sell.
- Plan for refinancing challenges – Understand the financial risks if one party needs to exit but refinancing is unaffordable.
- Accept that contracts have limits – No agreement can cover every possible future scenario, especially market downturns.
- Treat the arrangement like a business – Set emotions aside and approach co-ownership with the same level of seriousness as a business partnership.
At its core, homeownership is a long-term commitment. For friends or non-married partners, it’s not just about sharing a living space—it’s about entering into a financial agreement that requires trust, communication, and a plan for when life inevitably changes. Those who take the time to structure their ownership wisely can make it work, but those who rush in without considering the risks may find themselves stuck in a financial and legal bind they never anticipated.
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