Key Considerations When Buying Property With Family or Friends

Pooling resources to buy a home or investment property with family or friends can make ownership more affordable and create long-term financial opportunities. But while shared ownership can be rewarding, it also comes with unique legal and practical challenges. Before signing on the dotted line, it’s important to understand the key considerations involved.

Clarifying Ownership Structure

There are multiple ways to hold title when buying property with others, including joint tenancy, tenancy in common, and ownership through an LLC. Each option affects how decisions are made, how interests are divided, and what happens if one party wants out or passes away. Choosing the right structure can help avoid conflict and ensure your goals are protected.

Documenting Everyone’s Financial Contribution

People often contribute different amounts toward the down payment, mortgage, or maintenance. A written agreement should spell out:

• Who pays what upfront
• How ongoing expenses will be shared
• How profits, tax benefits, or rental income will be divided

This protects all parties and reduces misunderstandings down the road.

Building a Co-Ownership Agreement

A co-ownership agreement is essential. It should address practical scenarios such as:

• What happens if someone wants to sell their share
• How decisions will be made (major repairs, refinancing, renting the home, etc.)
• How to resolve disagreements
• What happens if someone fails to meet financial obligations

Clear expectations create smoother relationships and reduce the risk of disputes.

Planning for Unexpected Life Changes

People’s lives evolve. Marriage, divorce, job changes, or financial setbacks may affect a co-owner’s ability to participate. Planning for these possibilities upfront ensures the group has a roadmap for handling major changes.

Considering Liability and Risk

Shared ownership also means shared responsibility. If one owner defaults on payments or incurs liabilities related to the property, all owners could be affected. In some situations, forming a limited liability company (LLC) can help protect personal assets and clarify roles.

Creating an Exit Strategy

Even if everyone intends to own the property long-term, it’s crucial to outline how a co-owner can exit fairly. A well-crafted agreement may include buyout terms, valuation methods, and timelines to prevent rushed or forced sales.

Work With Professionals Before You Buy

Purchasing property with loved ones can be a smart and rewarding move—if it’s done thoughtfully. A lawyer can help draft or review your co-ownership agreement, advise on the best ownership structure, and ensure everyone’s interests are protected. Before making a big investment together, get clear legal guidance so your relationships and finances stay strong.