A Real Estate Pro’s View on Co-buying

Why do people co-buy?

T hroughout time, people have looked for creative solutions to their challenges. Skyrocketing rents and rising property prices in the PNW mean that today creative solutions are more important than ever. Some people look to get into the market to benefit from the rising rents as investors. Others are looking for the social benefits of living with a friend or loved one rather than living alone.

In an earlier post, we indicated that CoBuy is a “brand-new” approach to living. I would modify that statement. People have been jointly purchasing property throughout time. In fact, our own research, experience, and observation are what led us to the conclusion that building a platform to this group of buyers specifically would help more people get into the market faster, better and without some of the risks that they are often exposing themselves to unwittingly. I would say that CoBuy is a unique approach to the joint property purchase.

Doing your homework pays off.

Decades ago, one of mine and my husband’s first real estate purchases outside of our personal residence was a co-buy. We purchased a small apartment complex with my father and his wife. The property was in Arizona and my Dad and his wife managed the property. We did not provision adequately for any unforeseen consequences, however. That investment was a fixed-term investment and fortunately, it served us well. I was working in the corporate world and was not yet aware of the opportunities that exist using a Self-Directed Individual Retirement Account (SDIRA) or 1031 (taxfree) exchange to parlay that investment into something more significant. So, while we escaped any negative consequences, we did not optimize the opportunity that this purchase presented. We could have done much better financially out of it with the right information and guidance.

Get a plan together.

As we know, markets fluctuate. This can make a relatively large amount of money invested in a property unavailable to an owner at any given time. For co-owners who are investors, this is a primary consideration. This may be less of a concern if the property is your primary residence. A second important consideration is to know your partners. You need to be aware of what can happen and agree, in advance, on how you will deal with the “what if” and the exit scenarios that you don’t necessarily want to address.

You need to be aware of what can happen and agree, in advance, on how you will deal with the ‘what if’ and the exit scenarios that you don’t necessarily want to address.

It is difficult to do matchmaking when it comes to co-buyers. I believe that the decision of who to buy with is best left to people who share motivations to own a property. This suggests that they know one another and presumably already trust one another. Even married folks have disputes. It is important that co-owners in a property can be reasonable and have an approach to handling disagreements. It’s all good until it’s not. As one wise attorney said – “There is no [amount of] lawyering that can serve as a perfect substitute for a great partner.”1

Co-buying a home is not your average transaction.

How is co-buying is different? First, the nature of a home purchase can be an emotional one. Buyers often act more from their hearts than their minds. In a co-buy, there is usually at least one logical decision maker and depending on the number of people in the group, the dynamics of the decision-making can be tricky. Most real estate agents and lenders do not have the appetite to massage the group thinking amongst buyers with their distinct interests, needs, and motivations. This may leave a co-buyer group without direction and assistance when they need it most.

Getting it right.

Experience and research around the co-buyer journey have informed the creation of CoBuy as a platform and a service. If the co-buyer group can self-select its members, pre-determine their eligibility, and reach consensus around the parameters of the target property and the partnership with the help of simple yet powerful guided tool, they’re well-positioned to co-buy a home successfully. Provisioning for the “what-ifs” is another task that is critical to success in a co-ownership arrangement – one which the CoBuy platform can assist with. Finally, support from best-in-class co-buy savvy professionals across lending, real estate, title & escrow, legal, and beyond is handy if you’re looking to do things correctly. CoBuy leverages an ecosystem of local pros that are pre-vetted and have experience with co-buy transactions. Knowing when to reach out for support, who to reach out to, and being prepared ahead of time will save you time, money, and headache.

The co-buy transaction isn’t your everyday home purchase. There are more than a few moving parts and every transaction is different. With the right information and guidance, though, co-ownership can be rewarding both socially and financially.