Buying a home with 5 adults
January 23, 2012 12:51 PM
Buying a home with 4 other adults: advice and resources needed! Buying in the Washington DC/MD area.
4 close friends and I want to purchase a large house to be a group home for 5-6 people. None of us have ever bought a house before. This will be an intentional community and shared space where we live, and a potential jumping-off point for more serious group living in a few years. We are in our late 20's to early 30's.
Our main motivations are to build equity, own a sweet-ass place that we love, and continue to grow our community. Almost all of the members of this group have lived in rental group house situations for years, so the basics of a space (the size of the house, ratio of bathrooms to bedrooms, number of kitchen spaces etc.) have been worked out.
What we need are more specific legal options for formation of a corporation or nonprofit organization, as we think this might be the best way to safely do this. We also feel that banks and realtors might take us more seriously if we form some sort of LLC or organization.
What resources are required (money, bylaws, certifications, approvals, etc)?
What Federal, State and Non-Profit Homebuyer Assistance Programs are out there? (We know of HUD )
Have you ever bought a home with more than one other adult before and have a "I wish I knew this when..." experience?
4 close friends and I want to purchase a large house to be a group home for 5-6 people. None of us have ever bought a house before. This will be an intentional community and shared space where we live, and a potential jumping-off point for more serious group living in a few years. We are in our late 20's to early 30's.
Our main motivations are to build equity, own a sweet-ass place that we love, and continue to grow our community. Almost all of the members of this group have lived in rental group house situations for years, so the basics of a space (the size of the house, ratio of bathrooms to bedrooms, number of kitchen spaces etc.) have been worked out.
What we need are more specific legal options for formation of a corporation or nonprofit organization, as we think this might be the best way to safely do this. We also feel that banks and realtors might take us more seriously if we form some sort of LLC or organization.
What resources are required (money, bylaws, certifications, approvals, etc)?
What Federal, State and Non-Profit Homebuyer Assistance Programs are out there? (We know of HUD )
Have you ever bought a home with more than one other adult before and have a "I wish I knew this when..." experience?
I can't speak to forming an LLC or other organization. I am part of a TIC (tenancy in common) building. It's worth finding a lawyer who is familiar with this arrangement to draw up the agreement for you. Also, your mortgage rates will be higher because of the multi-person arrangement. Not sure why this is, but we have a mortgage broker who is very familiar with TICs and she says it's standard practice to get higher rates. TICs are a common property-owning arrangement where I live, so finding real estate professionals familiar with the ins and outs of it was easy. No sense of how common it is in the DC area but do spend the time to find people with expertise in it.
posted by gingerbeer at 1:01 PM on January 23, 2012
posted by gingerbeer at 1:01 PM on January 23, 2012
We did this (my husband, I, a third friend). We were also Tenants in Common, not an LLC.
My only advice is this: Have a written agreement for what you're going to do when one person wants to leave (because someone will want or need to eventually). In particular, sort out in advance how you want to handle the accrued equity (sweat and real) that each person has in the home.
We also had tenants, and had to sort out how the rights of the homeowners were different than the rights of the tenants, so you should consider how you might want to handle people who want to become part of your community but who can't or don't want to actually become an "owner". What is their status?
posted by anastasiav at 1:11 PM on January 23, 2012
My only advice is this: Have a written agreement for what you're going to do when one person wants to leave (because someone will want or need to eventually). In particular, sort out in advance how you want to handle the accrued equity (sweat and real) that each person has in the home.
We also had tenants, and had to sort out how the rights of the homeowners were different than the rights of the tenants, so you should consider how you might want to handle people who want to become part of your community but who can't or don't want to actually become an "owner". What is their status?
posted by anastasiav at 1:11 PM on January 23, 2012
I've never done this, but I have attempted to help unravel the resulting mess when multiple non-coupled people bought a house together. I know that there is a strong LAWYER! response on AskMe, but this is one of the most important situation for that.
Hire a lawyer that specializes in residential real estate transactions. This is a situation where your actual behavior in buying the house and paying the mortgage can overrule your intentions for property ownership, unless carefully preserved.
You mention some possible ways to manage this, but there may be implications you're not considering. (Including, almost certainly, tax issues that may view your actions differently than property law would otherwise dictate.)
Please, please - if you have enough money to buy a house, you have enough money to do it right.
Also, a good real estate lawyer can be an advocate when dealing with realtors and banks.
posted by mercredi at 1:12 PM on January 23, 2012
Hire a lawyer that specializes in residential real estate transactions. This is a situation where your actual behavior in buying the house and paying the mortgage can overrule your intentions for property ownership, unless carefully preserved.
You mention some possible ways to manage this, but there may be implications you're not considering. (Including, almost certainly, tax issues that may view your actions differently than property law would otherwise dictate.)
Please, please - if you have enough money to buy a house, you have enough money to do it right.
Also, a good real estate lawyer can be an advocate when dealing with realtors and banks.
posted by mercredi at 1:12 PM on January 23, 2012
You may wish to set up as a co-operative.
DC has an organization that is a resource for this.
posted by chapps at 3:02 PM on January 23, 2012
DC has an organization that is a resource for this.
posted by chapps at 3:02 PM on January 23, 2012
What mercredi said.
Talk to a (real estate) tax accountant, too. A business owning (effectively, investment) real estate doesn't get all of those sweet, sweet homeownership tax breaks. Also, were there a bankruptcy down the road, courts can force bankruptcy sale on investment property much easier than one's personal "homestead".
I'm not remotely expert on this. Just know people who've been dealt unhappy surprises.
Congratulations to you and your friends on this big exciting decision!
posted by nakedcodemonkey at 3:51 PM on January 23, 2012
Talk to a (real estate) tax accountant, too. A business owning (effectively, investment) real estate doesn't get all of those sweet, sweet homeownership tax breaks. Also, were there a bankruptcy down the road, courts can force bankruptcy sale on investment property much easier than one's personal "homestead".
I'm not remotely expert on this. Just know people who've been dealt unhappy surprises.
Congratulations to you and your friends on this big exciting decision!
posted by nakedcodemonkey at 3:51 PM on January 23, 2012
Aside from the legal issues, have you all lived together first? Maybe a short term rental with the 6 of you under one roof will be a good "try it out" sort of thing.
posted by Brian Puccio at 6:37 AM on January 24, 2012
posted by Brian Puccio at 6:37 AM on January 24, 2012
I used to know some folks just outside DC who lived in this sort of arrangement. This article talks a little about the process they went through. I'd suggest shooting them a quick e-mail to ask about logistical things; Ryan, their main contact person, is super friendly.
posted by ActionPopulated at 8:57 PM on January 24, 2012
posted by ActionPopulated at 8:57 PM on January 24, 2012
Some great responses here so far!
Thanks for all the comments about TIC. I'm not sure that's what we want, but it's great to know what the options are. Being a co-op might be closer, but may not hit all the marks yet.
mercredi - You give some good solid advice. What do you mean about tax issues?
nakedcodemonkey - Some scary advice, but much needed. And thanks so much! We are very excited about it too!
Brian Puccio - If I tried to explain to you the logistics of who's lived with who the last 5 or so years, it would take too long. Instead, let me sum up that yes, we have all lived with the others for a long period of time, and the ability to live with eachother effectively is not under question here. The non violent and open communication, organization, and other very important tasks one has to take action on when living with this many adults waaaay post-college but pre-children is very much a part of our culture already. In fact, we're living with eachother now. But after renting for the last 10 years or so, we'd like to move forward with life and finally purchase a house together.
ActionPopulated - So funny to mention that! I'm well aware of Maitri House, and have almost gone to some of their workshops before. Interestingly enough, the article you link to (that I can remember seeing before but did not notice) listed both the real estate agent and lawyer they used. I think we may try reaching out to them (if still available) to get more advice on what to do next, and potentially hire them.
Please, if anyone else can think of any more advice, please send it here!
posted by Kindlekat at 6:50 PM on January 28, 2012
Thanks for all the comments about TIC. I'm not sure that's what we want, but it's great to know what the options are. Being a co-op might be closer, but may not hit all the marks yet.
mercredi - You give some good solid advice. What do you mean about tax issues?
nakedcodemonkey - Some scary advice, but much needed. And thanks so much! We are very excited about it too!
Brian Puccio - If I tried to explain to you the logistics of who's lived with who the last 5 or so years, it would take too long. Instead, let me sum up that yes, we have all lived with the others for a long period of time, and the ability to live with eachother effectively is not under question here. The non violent and open communication, organization, and other very important tasks one has to take action on when living with this many adults waaaay post-college but pre-children is very much a part of our culture already. In fact, we're living with eachother now. But after renting for the last 10 years or so, we'd like to move forward with life and finally purchase a house together.
ActionPopulated - So funny to mention that! I'm well aware of Maitri House, and have almost gone to some of their workshops before. Interestingly enough, the article you link to (that I can remember seeing before but did not notice) listed both the real estate agent and lawyer they used. I think we may try reaching out to them (if still available) to get more advice on what to do next, and potentially hire them.
Please, if anyone else can think of any more advice, please send it here!
posted by Kindlekat at 6:50 PM on January 28, 2012
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posted by bensherman at 12:53 PM on January 23, 2012