Buying a House With Others

While the vast majority of houses are owned either solely by individuals or jointly by married couples, single people living as couples or in groups may want the advantages of homeownership, too. Many lenders are still cool to such arrangements, but willing ones can be found.

The two most usual ways of buying property jointly with relatives or unrelated friends are tenancy-in-common and partnership. A good real estate lawyer can explain these arrangements to you (see also the discussion in Chapter 12 of how to take title).

Owning as part of a group or with an unmarried partner can create problems. When a share of tenancy-in-common ownership changes hands, the lender may declare the whole loan due. For remaining owners who don't want to sell the property, the only recourse is to refinance.

The best strategy for unrelated individuals may be to set up a limited partnership, in which the partnership, not the individual owners, takes the title. In a limited-partnership arrangement, a deceased partner's heirs would acquire the interest in the partnership; the partners could be among the heirs. This precludes problems if one partner goes into bankruptcy or has other legal problems that could cloud the title, because the partnership is separate from any legal hassles of the individual partners.

If you choose to set up a limited partnership, consult with a lawyer experienced in partnerships who can help you draw up the partnership agreement.

The legal and financial details associated with ownership by unrelated individuals are just the beginning of your consideration of this issue.

Just as important (perhaps more so) is compatibility of lifestyle and the prospects of a durable friendship among all involved. As for investment value, keep in mind that partnership interests in a commonly owned house are not highly liquid. For any individual to get

A SMART CONTRACT FOR PARTNERS

Make sure your partnership agreement addresses the following points:

■ How the use of the house's space is to be divided.

■ How ownership will be divided, which determines who pays how much of the down payment, the monthly payment, and the cost of maintenance and repairs. The contract should describe how any profits or losses from rent or sale of the place will be divided and how tax benefits will be distributed.

■ What constitutes a deciding vote, and under what circumstances such a vote is considered necessary.

■ Which owner will act as managing partner and thus be responsible for signing checks and paying routine expenses.

■ How much advance notice a withdrawing partner must give and how the buyout price will be set.

full value for his or her share, the whole group may have to sell.

There are a lot of obstacles to overcome in such an arrangement, but with careful planning and thought-fulness among friends, it can work out well both socially and financially.

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