In Debt, Discussions, For Beginners, Money

Would you buy a home with a friend?

So I was watching Property Virgins the other day (What?! Just because I don’t want to buy a home doesn’t mean I am not interested..), and there was a couple who was buying a home with a friend.

The conversation kind of went like this:

Sandra (Realtor): So how much do you have for a down payment?

Single Guy: Well I have $25,000 and I think they [points to couple] have something like $10,000 – $15,000 as well.

Couple (Together): Uh….. well. $25,000 as a down payment.

Sandra: So you have $50,000 then?

Single Guy: Yeah, about $50,000 then.

Couple (Woman): No. Um.. *laughs nervously* It’ll only be $25,000.

Single Guy: But I have $25,000.

Couple (Woman): Yeah, so the down payment is $25,000.


[awkward silence]

Sandra: Well this is news to us! [gestures to Single Guy]!! *awkward laughter*

Travel-Photograph-Lyon-France-Countryside Oh Lyon! So pretty.

&%*#)!%&!?!!? 

My brain:

HOLD THE PRESSES SINGLE GUY!

YOU NEED TO BAIL ON THIS HOUSE PURCHASE RIGHT NOW!!!!!!!

Seriously?

You are planning to buy a house with your single guy friend (same age) who has saved up $25,000 for a down payment, and you two as a couple have $0 down?

What is the benefit for that Single Guy then? It’s basically like you get to own half the house without paying anything up front!

Even if they manage to come up with the cash later to “pay him back” to have an equal $25,000 stake in the house, the point is more that $25,000 TODAY is worth more than $25,000 TOMORROW (or whenever they pay him.. if ever).

Heck, even $1 yesterday, is worth more than $1 today due to inflation (3% on average).

Now you’re saying: But they can take out a loan for $25,000 to pay him.

Yes they could, but then you’re just buy debt.. with more debt. No?

A house has no equity until you pay it off.

A house is owned by the bank until you pay it off.

You do not own the house. Yet.

The bank owns the house, you’re just paying them money each month hoping to clear the balance before you retire so that you can own it free and clear.

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CAN YOU REALLY TRUST THEM WITH MONEY?

A house needs a down payment. If you can’t save up for a decent down payment, you can’t afford the house.

Period. No ifs, ands, buts.

If you can’t save enough for a down payment (let alone save ANYTHING), then you can’t afford the house.

Poor Single Guy coughed up $25,000 of his savings and still had $5000 budgeted for furniture and stuff because.. well he’s responsible like that (although Sandra said it was going to go to realtor fees).

The (Freeloading) Couple, coughs up $0 and still wants to own half the house.

Is this really fair?

Okay, so the SMALL benefit is that they are on the hook for half of the mortgage payments, but who’s to say they won’t bail on you and/or find another way to be weasels?

If they don’t pay their half, YOU have to come up with that half, or lose the house.

Case in point: They couldn’t even come up with a measly $5000 in their entire lives to put down to make it $30,000.

Frankly, not only should the ENTIRE house be in Single Guy’s name, but if they’re paying the mortgage, they should be on a plan to pay more than half the mortgage to equalize it back up to $25,000 coming from them, and/or just rent from him forever.

SO WHAT HAPPENED IN THE END?

Honestly I had to go to yoga, so I didn’t watch the rest of it, but I’m sure it ended badly.

Either they didn’t buy the house in the end and Single Guy bailed (I hope he did), or they bought it together and it was a big mistake.

I think their friendship would suffer as a result. How can it not? Even I as a viewer, could see it as being unfair.

SO WOULD YOU EVER BUY A HOUSE WITH A FRIEND?

My short answer? No.

Unless we plan on being bachelorettes for the rest of our lives (cat-and-dog-free because I’m allergic), I am not planning on buying anything with anyone but a partner, and even that is debatable because I don’t want a house here in Canada.

Not for these prices ($500,000 is the average home price in Toronto. Are you sick just thinking about it like I am?), and not for this quality of new houses (not stone, basically chip board held together with nails, thrusts, and a concrete foundation, with a flimsy roof).

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Sherry of Save. Spend. Splurge.

Millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. Since then, I have paid my $600K home in cash (my half was $300K), my $180K casr in cash, worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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21 Comments

  1. Natalie

    I looked up the episode on HGTV.ca and want to find out what happened in the end. Apparently the trios did end up buying a house together. Even though Sandra didn’t think they were going to do it.

    The single guy made a comment after first house: because he is the one who is coughing out most (ALL?) of the down-payment, he is getting to live in a basement (I LOATHE LIVING IN THE BASEMENT- been there done that). That seems like a short end of the stick.

    Reply
    1. saverspender @ save. spend. splurge.

      @Natalie: He was a pushover then. if I fronted all the money for the down payment, they’d be in the basement and I’d be in the master bedroom.

      Reply
  2. Michelle

    Hell. NO.

    Reply
  3. Pauline

    if they buy a $500,000 house, the couple should take a $250,000 mortgage and single guy

    $225,000, meaning he would repay less each month. Seeing how things look, it would be

    better for him to buy the house and rent a room to the couple. I did that with my

    previous BF, I bought the place because he had no deposit or will to buy the house, and

    he paid a lower rent than what we paid at our last place. He was happy but his parents

    said I was using him to make money. Now with current BF we bought a house and 90 acres

    cash and each paid 50%, but it is more a business venture and the house belongs to a

    company of which we each have 50% of shares so I could buy his shares or him mine. My

    friends who are married are buying a house together and the girl is putting 70% of

    deposit and repayments, the guy 30% because he earns less and has less deposit. If they

    ever divorce she gets 70% of the sale price or buys him out at 30%. It seems fair that

    you own only what you pay for.

    Reply
  4. PK

    I bought this house with my fiance (in my name, my down payment). I no longer have a fiance (said fiance is now my wife!), but California is a ‘Community Property’ state – meaning she has a claim on the house. Worked out fine!

    Of course, even though we weren’t married, it was a pretty solid bet we would eventually be – ‘fiance’ is definitely closer to partner on the friend/partner scale. Definitely much closer than ‘girlfriend’.

    (Before the tax lawyers yell at me, technically her claim would be based on a complicated calculation called a §2640/Moore/Marsden. I never want to have to learn more about that process, haha.)

    Reply
    1. saverspender @ save. spend. splurge.

      @PK: She wasn’t a “friend” 🙂 It worked out for you but it could have easily gone the other way… although even if you were married that would have changed nothing, because she could have divorced you and taken half the house.

      Basically, buy a house with someone you plan on living with. Don’t buy it with friends unless you plan on living with them forever, is my advice.

      Reply
  5. A Dash of This and That

    Yea it’s a definite NO

    Reply
  6. Michelle

    No, that sounds like a horrible idea. Hopefully he bailed.

    Reply
  7. AdinaJ

    I bet that couple totally claimed the master bedroom/suite, even though they weren’t paying a dime towards the downpayment. Frankly, the single dude’s a chump if he stuck around one second longer after hearing that downpayment news. Unless there’re more to this relationship than what was disclosed.

    Reply
    1. saverspender @ save. spend. splurge.

      @AdinaJ: I doubt it. I think he was just their roommate before, an easygoing guy and they all said: Hey! Let’s all buy a house together!!!

      Reply
  8. MakintheBacon

    A big fat no. The thought would never even cross my mind. It would have to be with my significant other or by myself.

    Yes, the price of houses in Toronto also makes me sick and makes me hate Toronto even more. So glad I don’t live or work there.

    Reply
      1. Gen Y

        @saverspender @ save. spend. splurge.: Yes, sounds extremely messy. Thinking about the possible legal nightmare this situation presents make me shudder.

        Reply
  9. Gen Y

    I don’t think I would be comfortable buying a property with a friend, period. Things could go really bad really fast, let’s hope the single guy bailed.

    Reply
  10. SarahN

    Wow here in Sydney a house in the outer suburbs are maybe that cheap! We have such expensive property! I suppose some people might see friends like family or as close as their intimate partner. Who knows, maybe they had a polygamous relationship! But I’d be cautious! Im pleased I bought by myself (I was single at the time) cause it proves I can do it. Oh I have a one bed loft costing just shy of 470k!

    Reply
    1. saverspender @ save. spend. splurge.

      @SarahN: Well in Sydney, your cost of living is much higher than in Canada. 🙂

      Reply
  11. Debt Blag

    As an investment property, sure — provided the terms are clearly written out in a contract which would allow me to make sure the shares are fair. In the situation this guy’s in, definitely not

    Reply
    1. saverspender @ save. spend. splurge.

      @Debt Blag: Not to live in, true. But as an investment I’d consider buying a place with someone as long as we have an agreement on what if one of us needed to sell for the money, etc.

      Reply

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