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366 Bainbridge Street (Halstead Property) 366 Bainbridge Street (Halstead Property)
Although properties are frequently purchased by two or more family members, for most people, the idea of buying with friends simply sounds like a bad idea. After all, no matter how many issues you have with siblings, parents or extended family, even a nasty older sister may appear to be a less complicated co-buyer than a friend. With the rise of peer-to-peer funding, however, investing in real estate with friends is an option that is gaining steam.

Turning to Friends for a Down Payment 

If you want to establish a start up, make a film or engage in many other costly endeavors nowadays, you are just as likely to turn to your peers as you are to a bank. Although raising capital was once primarily carried out through formal lenders, it is now increasingly executed via peer-to-peer lending platforms. Whether one needs just a few thousand dollars or several million, the idea of turning to one’s peers for start-up funding has become the norm—especially for many Millennials—and the trend is increasingly impacting real estate deals too.

Compass agent Jake Velazquez sees clients turning to friends for a range of reasons. “There’s a rising trend in the use of crowdfunding for real estate investments,” says Velazquez. “Groups of friends are also taking the same idea and pooling together their money and skills for investments. In some cases it works very well, since different people can take on different roles, and this can be more efficient.” Whether the deal involves a buyer turning to friends for help with a down payment or friends pooling resources to invest in a residential or commercial property, as peer-to-peer lending continues to move from a peripheral to central funding strategy, it is also restructuring how buyers approach real estate investments. But is it wise to purchase with friends?

'Pre-nuptial Contracts' for Friend Co-owners

Most friends buying together don’t want to think about worse-case scenarios, but it is one of the most important things to consider when it comes to co-ownership. Indeed, like newlyweds who walk down the aisle with a pre-nuptial contract already inked, friends who buy together—even if they are driven by a desire for community rather than profit—are advised to prepare for the worst and hope for the best.

Compass agent Marina Schindler is currently working with two friends who are in contract to buy a townhouse in Brooklyn. The pals are purchasing a two-family home that they intend to share. “At one point, they gave up and decided to search on their own,” says Schindler, “But ultimately, they realized they couldn’t find what they wanted on their own. It was less expensive for them to buy a townhouse together than to do it individually and, together, they were also able to find the home they both wanted.”

Schindler points out that while friends co-purchasing may be on the rise, there is a long history of friends buying properties together in New York City. “Many artist buildings in Soho and the East Village were purchased by friends, and these are now among some of the city’s most coveted spaces,” she points out. However, friends are coming together to buy apartments as well as buildings. Condos may be perceived as friendlier to this type of arrangement, but the consensus at Cooperator News is that a co-op board cannot discriminate against buyers based on marital status. Indeed, co-op attorney Andrew Freedland says, "This arrangement happened a lot before marriage equality, when gay couples wanted to purchase an apartment together. I don't see any reason two friends couldn't do it."

While Schindler is very optimistic about friends buying together and enjoys the community-building aspect of bringing friends together as owners, she notes that both of her current clients are working with attorneys to ensure their agreement is as tight as possible. “You really need to nail down all the possible worst-case scenarios,” she says, “What if the roof needs to be replaced? What if the basement is flooding? Who is responsible? The most important thing is having an internal agreement.” Freedland concurs, recommending a tenancy-in-common agreement outlining the distribution of tax benefits, inheritance rights, and what would happen to the apartment if one owner dies or wants to sell.

Buddying Up for a Vacation Home

While some friends team up to invest and others team up with the intention of purchasing a primary dwelling, for others, the goal is a shared second home. After all, even for some of the city’s more affluent buyers, a second house in the Hamptons may otherwise be out of reach.

Compass agent Cindy Scholz has worked with multiple sets of friends buying homes in the Hamptons and, by and large, she considers these co-purchasing arrangements to be a great option for people looking to buy a second home. “Co-purchasing is a great way to build equity while minimizing the upfront and ongoing costs of purchasing a home,” explains Scholz. But building equity is usually not the only or primary goal for these buyers: “My clients know the Hamptons is their destination of choice for the summer and are tired of someone else’s mortgage. Co-owning allows my clients to divide up the costs and responsibilities of a home while experiencing all the benefits. They are not overextended financially, allowing them to still take ski vacations and travel to other destinations in the off-season.”

Scholz also emphasizes that for many her clients, co-purchasing even represents a way to immediately increase their cash flow. “My clients often rent their homes for a portion of the summer and use the profits to take a trip elsewhere,” says Scholz, adding, “The Hamptons is prime for appreciation and ability to rent for ultra-prime prices. These conditions allow purchasers to choose between a long- and short-term hold—for co-purchasing, this flexibility is very appealing.”

“Keep things simple, be realistic, and don’t get discouraged. It’s easy for a group to persuade you to have unrealistic expectations—just stick to the numbers and make sure the team stays focused.”

To Buy with Friends or Not—That is the Question

While there are no guarantees, there are at least a few factors that appear to contribute to the success of friend co-investments. Scholz has observed that while the length of friendship prior to buying varies and doesn’t appear to be a major factor, her clients nearly always have “aligned interests, mutual friends and similar financials.” Velazquez has seen both good and bad deals among the friend groups with whom he has worked. His advice? “Keep things simple, be realistic, and don’t get discouraged. It’s easy for a group to persuade you to have unrealistic expectations—just stick to the numbers and make sure the team stays focused.” Schindler agrees that co-purchasing can be a great way to buy into the city’s real estate market but adds, “it is also crucial to have completely honest communication between both parties.”

Centrally-located condos under $900K

clinton hill 475 Washington The Continental -nyc real estate-manhattan condos deals apartments
From the Listing: Residence 2H is a 764-square-foot, cozy two-bedroom, one-bathroom home with three exterior exposures. The possibilities are endless with this flexible layout; the second bedroom can also be used as a convenient home office or nursery. The chefs' kitchen is equipped with a Viking gas range stove, a Fisher and Paykel refrigerator, a full slab Quartz countertop with waterfall detail, and stainless-steel appliances by Bertazzoni, Bosch, and Fisher and Paykel. Modern bathrooms include ceramic tiling, light grey vanities with Quartz countertops, mirrored medicine cabinets, and Kohler or Delta fixtures. This newly renovated unit also features white oak plank floors, central air, and an in-unit washer and dryer. See floor plan and full details here.

Kips bay towers The Continental -nyc real estate-manhattan condos deals apartments
From the Listing: Wonderful opportunity to own a convertible two-bedroom at the coveted Kips Bay Tower. Tremendous light and views from the north-facing floor-to-ceiling windows overlooking the condominium private garden. King-sized master bedroom with the converted bedroom large enough for a queen-sized bed, plus desk space as currently laid out. There is still ample living space after the conversion, wall can easily stay or go, perfect for those in need of an extra bedroom or a great investment opportunity. See floor plan and full details here.

42 carroll street The Continental -nyc real estate-manhattan condos deals apartments
From the Listing: Welcome to the Columbia Waterfront neighborhood which borders Carroll Gardens, Red Hook and Cobble Hill and just steps to the Brooklyn Bridge waterfront park and promenade. 52 Carroll Street, unit 1L is just one flight up into the open concept living/dining room/kitchen. The working kitchen has stainless steel appliances and hardwood cabinetry. The bathroom has white subway tile and a pedestal sink with a large mirrored medicine cabinet. The floors are hardwood and newly sanded and re-surfaced. Ample closet space throughout. Separate laundry room in the unit. See floor plan and full details here.

The Continental -nyc real estate-manhattan condos deals apartments Irvin House
From the Listing: Amazing pricing for a 2 bedroom condo! Located in the sweet spot between Chelsea and Hudson Yards, this elevator condo conversion adds up to a chic home meets great investment. The apartment boasts an open kitchen that flows into an L-shaped living space. The windowed L makes a perfect dining area, home office, or convertible second bedroom. The thoughtful and meticulous renovation combines pre-war details with stunning modern finishes and incredibly low monthlies. To top it all off hardwood floors, top-of-the-line appliances, a sleek bathroom and lovely light with city views from every room. . See floor plan and full details here.

From the Listing: Everything you're searching for in a convertible two-bedroom apartment. Perched on the northeastern corner of the building, 731 has a great floor plan, oversized windows, rich cherry hardwoods, W/D in the unit, a renovated kitchen with a window, 1.5 baths, and a living room with a dining alcove! See floor plan and full details here.

The Continental -nyc real estate-manhattan condos deals apartments
From the Listing: ; Apartment 5D was beautifully renovated and converted to a two-bedroom in the heart of Turtle Bay. The apartment has oversized windows with bright southern exposures and open city views. Part of the renovations includes immaculate Brazilian Cherry floors that offer timeless appeal throughout the apartment. Enter the kitchen to find all updated stainless-steel appliances, granite countertops, custom-made cabinets, porcelain tiles on the floor, and ceramic backsplash. There is also a deep sink and dishwasher in the kitchen. See floor plan and full details here.

From the Listing: Large one bedroom, currently converted to 2BR with a wall up in the living room. Open pass-through kitchen with granite countertop. Parquet floors throughout. Through the wall AC units. The main bedroom fits a king-size bed. Good closet space. Located in the heart of midtown east and close to everything, this 24Hrs doorman building offers a roof deck, laundry room and allows live/work. Pets are allowed here and building is investor-friendly as well.; See floor plan and full details here.

From the Listing: This one-bedroom/one-bath apartment boasts a spacious layout with a large den/home office, currently serving as a second bedroom. Features include southern exposure, hardwood floors, good light, great closet space, and a dishwasher. The building has a laundry room and a courtyard on the ground floor. See floor plan and full details here.

Roanoke Fort Green The Continental -nyc real estate-manhattan condos deals apartments
From the Listing: Featuring two spacious bedrooms, high ceilings, and tons of closet space, you should run, not walk to this fantastic, well-priced home. Enter through a large foyer that opens into a large bright living room (16x14) with three oversized windows. The primary bedroom (14X10) features oversized closets, high ceilings and ample space for a king-sized bed, while the second bedroom (9x11) can also easily be used as an office. The charming kitchen features stainless appliances and ample cabinet space. See floor plan and full details here.

The Continental -nyc real estate-manhattan condos deals apartments lower east side
From the Listing: Welcome to apartment 2R! This stylish two-bedroom offers a functional layout, high ceilings, and a cozy space to call home. Entering the apartment, one is welcomed by the sleek pass-through kitchen with raised breakfast bar and two windows perfect for cooking and entertaining! See floor plan and full details here.

Williamsburg condos The Continental -nyc real estate-manhattan condos deals apartments
From the Listing: A 1 or 2 bedroom close to one of Williamsburg's best avenues for under $1M? Yes, please! Unit 3F at 133 Conselyea, a South-facing condo steps from the Graham Ave subway stop and thriving bar and restaurant scene. This well-maintained unit features hardwood floors, granite counter-tops, stainless steel appliances, and cherry wood cabinetry. It would be perfect for a first-time homebuyer or for an investor looking for solid rent with very low common charges and a desirable tax class. See floor plan and full details here.

East Williamsburg apartments The Continental -nyc real estate-manhattan condos deals apartments
From the Listing: Brand New to the Market! The Best and Most Incredibly Upgraded and Redesigned 2 bed/2 bath out of the Entire Olive Park Building! The current owners invested close to $55k on upgrades. Plus there are close to 13 YEARS REMAINING on the TAX ABATEMENT (currently $25 per month). See floor plan and full details here.

Carroll Gardens homes The Continental -nyc real estate-manhattan condos deals apartments
From the Listing: Loft 2C is a quiet, urban oasis located at the back of the building. A true work of art, this loft has been meticulously hand-crafted with incredible attention to detail. Enter into a grand living and entertaining space with high ceilings, open kitchen, bright & airy. A Juliet balcony overlooks a serene interior block of lush backyards. Fully equipped chef's kitchen with stainless steel appliances including dishwasher, glass back-splash, and a breakfast bar with hand-poured concrete countertops and removable butcher block cutting boards. See floor plan and full details here.

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Contributing Writer Cait Etherington Cait Etherington has over twenty years of experience working as a journalist and communications consultant. Her articles and reviews have been published in newspapers and magazines across the United States and internationally. An experienced financial writer, Cait is committed to exposing the human side of stories about contemporary business, banking and workplace relations. She also enjoys writing about trends, lifestyles and real estate in New York City where she lives with her family in a cozy apartment on the twentieth floor of a Manhattan high rise.