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How young is "too young" to buy a home?
The four of us (SO and two friends) are all in our early twenties (in fact, I'm the youngest by a couple of years). We were in the apartment market but had the idea to check out the housing market as well for a better investment.
We would own the home as tenants in common and instead of paying rent to an apartment, we'd split the mortgage payment four ways. The mortgage payment would be close to..if not lower than rent.
I'm looking for opinions, tips, suggestions..anything. Please assume in this matter we won't be looking to screw each other over like that. We're just wondering if this is a possible or valid option. How likely would a RE agent be to sell a house to four young adults, for example? We're responsible, have steady jobs, and good credit scores. What hurdles do you foresee us running into?
I frequent TK boards so I knew I'd get good advice from TN as well.
Thanks a lot! I really appreciate any help or ideas on the matter. I'm in the early stages of this and will be looking through all of TN resources on Real Estate and home buying.
-Alanna
Re: How young is "too young" to buy a home?
Honestly, I don't think it's wise. It's not really an age thing, it's circumstantial. What happens if there's a fight between friends? What happens if someone doesn't or can't pay their portion? What happens if the other two get married? What happens if someone has a guest you don't care for? What happens if someone wants to move?
Renting is one thing. It's easy to get out of if things turn sour. But dividing ownership four ways sets you up for complications.
I don't know if it is possible, but it is a VERY bad idea for a multitude of reasons. What if someone loses their job and cannot pay? Are the other three willing to compensate? What if you and SO break up? What if one of you wants to move away? What if you decide that you want to get married and have a family? It's not as easy of an answer as "We'll just sell it." What if one of you doesn't want to and/or doesn't want to "buy" the others out.
If you are dead set on this, ONE of you should purchase the home and the other three should pay rent.
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Don't buy a house with friends and some people will also say don't buy a house with a SO until you are married.
What happens if one of the 4 of you want out? Do you all have to sell? Do you have to refinance to get the 4th off the mortgage? What if housing prices drop (more) and you are underwater? What if someone loses a job... will the other 3 pick up that person's portion of the mortgage? How will you decide when to sell and what offer to accept? Who mows the lawn? Who pays when a roof needs replaced or an AC needs replaced? Who decides when to remodel the bathroom and who pays for it.
Honestly, you are just asking for a lot of problems mixing friends and money. Plus, you are all going to be adults and no one really wants to live with your friends for the rest of your life. If you and SO get married, you'll probably want your own space.
ETA: This isn't an age thing. DH bought his first house at 21. It's a don't buy a house with friends thing.
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First of all, thank you for your responses.
I feel like it would be a better investment, but reading the "what-ifs" that you all posted makes me double think.
I think I really just needed to clear my head and get outside advice on the matter since the four of us were really gung-ho and biased on the issue.
SO brought up the point that I don't know where I'll be stationed after college and we all may have to be moving away for work.
With the points that you all mentioned I think there are just too many possibilities for me to be comfortable with the idea at this moment.
Wow, that honey moon stage of buying a house ended quickly, lol
Thanks for your help!!
This alone would "seal the deal", so to speak. Listen, I bought a house young... I was 22 when we closed but we also knew when we bought that there is no way that we'd be moving in the next 5-7 years. If there was the uncertainty that we could be moving sooner than that, it doesn't financially make sense in this market. I belive the latest figures were that if you don't plan on staying somewhere for the net 7-10 years, you'll be lucky to break even.
It's a dog's life!
Also, home buying/selling is a very costly venture alone. There are closing costs to pay, downpayments to come up with, escrow money to come up with (property taxes, homeowners insurance). And then selling, you have to pay realtor fees which are usually 5-7% of the selling price PLUS sometimes you pay part of the buyer's closing costs. They are saying now that you need to be in a house for a minimum of 5-10 years before you'll "break even" when you sell. That's a long time you know!
I'm glad we were able to give you a bit of a reality check and I'm glad you are taking the advice given! When you and SO move, rent for a while to get to know the neighborhoods before buying and if you are going to be relocating every few years (since you said "stationed") you might be long term renters if you are moving every few years. If you are serious about living with friends, try to find a house to rent.
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Age isn't an issue here.
Owning a building as a four way TIC could be very tricky in the future. What happens when your friends break up? Or someone has kids and needs more space so they need out? It is difficult to sell a TIC interest. Worse if there are bad feelings. I've seen two friends go through this. They were in their 30s when they bought. Wrote up clear contracts, abided by them (even in the dissolution of the TIC). Even though one was able to buy the other out, it had consequences for both. I can't imagine how awful it would have been if they hadn't both been lawyers and known exactly what they were in for. Four people could be a mess.
Your financial future is at stake. Your professional future may also be at stake if your field does credit checks. Your personal future is at stake. (Do you ever want kids? If you don't, how would you feel stuck in a small building with 10 kids when your friends can't sell their interest and move out?)
I bought my first house at 19. Alone.
There is NO WAY I'd buy a house with 3 other people, at any age.
twelve years old is too young to buy a home.
seriously, though. i agree with everyone else. it isn't so much a magic age as a maturity level (in a number of ways - financial stability, desire to commit to a certain location, etc) / certain point in your life that makes buying a home the right decision. what you described is a bad idea.
I would definitely not do that. For one thing, if the mortgage is close to rent, then it's actually more expensive than renting in the short term, since owning has a lot of expenses.
I have friends who did a similar thing because sharing houses is very common in my neighborhood. They started a corp (non-profit, I think) and bought a house together. It was a fixer and needed a bunch of work. What do you do in this circumstance when you have a problem like mold and not everyone can afford to chip in to fix it? They also bought a little too far out of the nicer part of our neighborhood, so people got tired of living there. 2 of the people were a couple and there were two other people involved. A year or two later, the couple was broken up and none of the people involved lived there. They were renting out all of the rooms and hated it because they didn't want to be landlords. Now, one of the people is living there again and the rest of the rooms are rented.
The thing that will definitely happen and definitely suck is that if any one of you want to leave, there's no easy way to get your money back unless someone can buy you out. It's not a wise investment to tie yourself to other people like that, unless it's just the person you're married to.
Now, on the other hand, around the same time, DH and bought a house and lived with roommates (when we were 23 and not yet married). We had the money to put forward and planned to live in the area for a while, and our other roommates didn't. So we bought the house, and they paid us rent. This is a lot more cut and dry. A few years later, we moved out and just rented our room as well. Because we didn't have anyone else to worry about and the other roommates didn't need to stay tied to the area, the flexibility made this convenient for us.
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Also consider repairs and improvements. My H and I disagree (politely) over house things all the time. Can you imagine if your roommates decided the house needed something, like a new bathroom or a new kitchen? Or if one of them did some kind of accidental but expensive damage? Or if your roommates wanted to do X project but you thought it was wiser to do Y project?
It's hard enough when you're married. It would be extremely difficult as roommates.
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If you could end up moving in a couple of years for work, it's not wise to buy. You certainly won't make anything off the deal, and might lose money once you factor in all the fees associated with buying/selling (legal, taxes, real estate agent fees, etc).
Age aside, I'd never buy a house with friends. Ever. It could end in any number of awful problems. I'd never buy a house with anyone other than my partner for that matter. We bought our house at the ripe old age of 21 - everyone was very willing to work with us. We could afford it, so there were no issues.