4 of my good friends and I are going to be new grads starting jobs in the bay this coming year. We all have good new grad salaries and we're wondering how practical it would be for us to buy a house a few years from now. Ideally we would all be responsible for 1/5th of the down payment and mortgage. How feasible is this? Is there anything in particular to consider? Are we being naive?
This has bad news written all over it, almost every time I’ve seen folks that aren’t married/in a relationship do this it ends badly.
Horrible idea. What you will save in the down payment will be used for the lawyer to draw up a contract. It would be extremely complicated especially with 5 people involved in it.
Nope nope nope
I’m debating the same thing with 2 other people right now. OP would you live in the house?
Who gets to deduct mortgage interest in this case ?
Proportional to payment.
Just too risky...
Bad idea, but if you are pursuing this plan, then make sure you guys have proper exit plan describe in the contract... There are tax advantages of owning a house. It's difficult to get this straightened up without buying a house under a legal entity such as corporation or LLC.
Incorporate a LLC and buy the home through the LLC.
why?
Because then you own shares in the LLC which owns the home. You can divvy up shares according to whatever deal you cut with one another (maybe the one with the smaller room pays less and gets fewer shares). If you go the LLC route recognize a few things: (1) it'll cost a few thousand in legal fees. Please don't legal-zoom it. Legal zoom is for lemonade stands. And (2) you lender won't give you as sexy of a rate. When you mitigate risk on your side (by forming an LLC), the lender does the same in theirs (by jacking rates up).
You're going to need to write up a very extensive contract
Reality show execs probably have an easy template