Buying a home in seattle with two friends

CEMEX / Eng gino
May 8 20 Comments

Two close friends and I are going to start working at microsoft in seattle next month. We are planning to buy a home or apartment around redmond or seattle in a year as an investment and for us to stop paying rent. Our idea is that between the three, we can finish paying a decent place within 3 years. After that we can still live together or go our separate ways.
TC average: 145.

Do you guys consider this is a good idea?

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TOP 20 Comments
  • Amazon 🥨🥓carb
    Get a lawyer and a contract written down.

    Things can and will get ugly.
    May 8 1
    • CEMEX / Eng gino
      OP
      Noted, we are aware it might not work out. Thanks
      May 8
  • CEMEX / Eng gino
    OP
    Can you argument these thoughts?
    May 8 2
    • New / Eng DEV_ENV
      We are at the peak of the market, pouring all your money into paying off a house over 3 years is a bad investment. Plus it becomes tricky if e.g. one of you wants to sell it but not the other. Real estate is illiquid investment with high transaction cost even when buying alone. Splitting it 3 ways will be a nightmare. You may feel close now, but when you get married each of you will have your own financial goals and they might not all align.
      May 8
    • Salesforce FloorPlan
      What happens when one person gets a GF and wants her to move in with them? Then suddenly they're occupying more than 1/3 the house. But it doesn't make sense to increase the equity they pay. Could make the GF pay rent that gets distributed between you.

      I'm not saying any of the problems are insurmountable. It's just if they're not discussed in advance it could lead to arguments later
      May 8
  • New / Other
    charizard

    New Other

    PRE
    Nintendo
    BIO
    Trying to catch em all.
    charizardmore
    Best way to ruin friendships? Hopefully not and I'm wrong
    May 8 0
  • Adobe Adober
    Chances of everyone wanting to sell at the same time are slim to none. I’d be very explicit about buyout terms.
    May 8 0
  • New / Eng
    errfileno

    New Eng

    PRE
    Microsoft
    BIO
    Senior Software Engineer. 15yoe. Seattle. ~$400k TC
    errfilenomore
    If you are set on doing this, form a limited partnership, have the partnership make the purchase, and rent from the partnership. Clearly define what buy-out looks like if one member is unable or unwilling to continue making their payments.

    A fair renting strategy is to take the base 30-year term mortgage payment and split it up fairly by usage: one point per person and one point per private room means a couple sharing a room would pay 50% more than a single person with their own room. Then, issue shares of the partnership relative to what people put in on top of rent. That way when you decide to sell there is a clear idea of who contributed what.
    May 8 1
    • Splunk KE94107
      In SF there is a formal legal construct for co-op ownership like that: TIC. But it requires a multi family building not a single-family house.
      May 8
  • LinkedIn killerarya
    Bad idea for human reasons, let alone investing reasons.

    Better options:
    1. Rent and split 3 ways, instead of buying
    2. One of you buy a place and rent it to the other 2. Work out fair rent split based on Craigslist prices. This way when you split up there's no messy lawyer stuff.
    May 8 1
    • CEMEX / Eng gino
      OP
      Thanks, sounds good
      May 8
  • Salesforce bheetophen
    Your reasons for wanting to buy might be misguided as well. Including all the above advice, the following applies for a single family choosing to buy as well.

    1. Although you stop paying rent, you start paying property tax, mortgage interest, and HOA (maybe) which will make up 80% of your monthly payments initially. So you’re basically still throwing away most of your money.

    2. You made a point about paying it off as fast as possible. Generally this is not the best idea. Homes typically appreciate faster than the interest you pay for the mortgage, making it a decent leveraged investment. The cash you have can actually be used to invest elsewhere. Time value of money. The money you plan to dump into the house actually has better earning potential elsewhere. You’re making 3.5-4% on your money dumping it into your mortgage which is lower than most other forms of passive investing

    Basically, the age old advice of rent being money down the drain and paying off a mortgage being your goals in life have been shown to be wrong. So if these are your motivations for buying I’d reconsider
    May 8 0
  • Epsilon ySPg80
    Dont do it!
    May 8 0
  • Salesforce tensorchic
    Don't.
    Unless those friends are like family and by that I mean, literally family.
    If one of you lose your job or need to leave Seattle, there's no exit. The others have to cover. Legally the person who exit owes you nothing. And that's just one of the problems..
    May 8 0
  • Amazon yuri
    My stepdad did this and they lived at the place for a few years and flipped it. They bought at a good time and all made money. Practice living with these people beforehand and lawyer up.
    May 8 1
    • CEMEX / Eng gino
      OP
      That is awesome
      May 8
  • Apple Fearless12
    Bad idea. The investment is highly illiquid and even if you agree in the future on when to sell how are you going to agree on how much?
    Plus what if some of you get lay off or for any reason has to move ? To many unknown in life
    May 8 0
  • Movement Mortgage QSaS36
    yes -
    bad idea ..its a bad idea when its just two people and magnified with the 3rd person ....tooooooo many isues can arise ( especially if you are inexperienced home owners)
    May 9 0
  • Zillow Group hot stuff
    No
    May 9 0
  • CEMEX / Eng gino
    OP
    We will take into account all of your comments
    May 8 0