Buying a House with 3 Friends... Good or bad idea?

Question

My friends and I are 24 years old and 6 months out of college. We are all in good careers, I myself being an accountant for Deloitte, one friend is a sales engineer for Nalco, and my other friend is a head sales rep for Fastenal. We have all been living together for the last 4 years and are tired of paying the mortgage for someone else. We want to start paying ourselves and we believe the best way to do this is to buy a house together. The goal would be to turn it into a rental unit once we are all ready to move out and start our families. The houses in Fresno that we are considering range from 230k-320k.

I would appreciate any advice, whether it be on the type of house to look for, cautions of investing with friends or simply whether this is a really good idea or one that is destined for failure.

Thank you in advance,

Cory

I would appreciate any advice, whether it be on the type of house to look for, cautions of investing with friends or simply whether this is a really good idea or one that is destined for failure.

Thank you in advance,

Cory

Trevon Peracca · Answer

Some people can pull it off, but most people i know do not mix business with friendship or family.

My personal preference as well. I will give advice and help them with their business, but i will never "partner" with them or have any type of joint financial obligation.

Also depends if they are close friends or just a people you went to school with...

Best Regards,

Trevon Peracca

Elizabeth Colegrove · Answer

I totally agree that cheaper house rent better than expensive ones. We have done much better buying the crappiest houses in the best neighborhood. It is a better rental. not only are the profit margins better but it is easy to keep filled.

Chris Williams · Answer

Aside from the questions asked, if your main objective is to buy the house to rent it out at a later date, you have to look beyond seeing the property as a comfortable home and see it as an investment and what has the best return on your money. Here in Fresno there is a not a big difference of rent ranges from houses in the high $100k's to those in the high $200k's. I personally think your money would be better spent buying a remodeled house just under $200k (93726, 93710, 93705, 93722), than buying something around $300k. Once you all move out and rent the house, you will have better cash flow and a wider availability of potential tenants if you stick around $200k.

Relationally speaking, responsibilities, privileges, and expectations need to be properly laid out.

Brian Mathews · Answer

Do not do it.   It will turn into a huge mess.  Horrible idea.    If one of you want to buy a house and rent out rooms, that is fine.   But do not put 3  names on the mortgage.   It will ruin your friendship.    One of your future spouses will screw this up if one of you don't first.  Remember this always in your life.    The only ship that won't sail is a partnership.

Elizabeth Colegrove · Answer

Welcome to Biggerpockets!

Great to connect. My husband and I live in Hanford about an 45 minute north of Fresno. We own 4 houses out here and are closing on our 5th shortly . I absolutely love investing in this area (Hanford/Lemoore) and I see so much possibility.

My husband and I bought our first house at 23 and 25. While we were married at the time, I can honestly say I would not buy with anyone else other than my married partner. I have helped family and even manage for them. Honestly the only way our relationship has not been ruined is that we have no financial ties.

My husband is an officer in the military and I have seen many of his buddies buy together. Honestly they are all trying to sell, get out, or buy another out. It is just mess. Unforutnatlly wives, children growing up made it more not less complicated.

It sounds like you have enough funds to buy. I would personally just buy and rent to your friends. The only times I have involved friends have always turned out unwell. While I am sure you will always find a positive story. To me its just not owrht it.

Mike Cumbie · Answer

Hi @Cory Ventura,

Welcome, I recommend making sure you set up how you want to handle people wanting to move at different times (Before going forward and getting it in writing) . Friend A gets a job offer in Ohio and is going to leave, Friend B, 5 months later meets someone and wants to move out to be with them. Friend C says "Hey I want to stay here I have established myself here". Who still pays part of the mortgage? Do all have to leave and start renting it out, does one person keep paying for a house from Ohio? Do you all refinance and buy each other out etc..

Good Luck in your endeavors!

Buying a House with 3 Friends... Good or bad idea?

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