23 year old w/ excellent credit considering buying w/ a friend

[Peter Apockotos]

Hello,

- Myself and a friend from college are both 23 with 750+ credit scores and ended up with full-time offers in Nashville after being fortunate enough to finish school debt-free
- We currently each pay about $1,000/month for rent and are considering purchasing a 3 or 4 bedroom home to move in and rent out open rooms to friends
- We've been qualified for being able to put 10% down without needing to pay PMI on a mortgage as co-applicants. We're looking at homes primarily in the Germantown/North Nashville area that are going for around 400k. From my understanding, it seems like we'd be betting on appreciation/capital gains to a heavy-ish extent if we were to go through with purchasing and then exiting/selling 4 years from now.
- Would anyone be able to give advice or input in regards to if they think this or another idea would be a better over renting as we currently do? It's so painful for each of us to shell out 1k/month in rent - but it's also very scary to think of purchasing a 400k home to find out a couple years later that we'd be 100k underwater if this market is truly as overheated as some think. We do value being close to areas to go out so we're looking to strike a balance between the utility/quality of life we'd get from a home along with making a sound financial decision. Furthermore, our commute wouldn't be very manageable outside of anywhere other than the downtown area such as Dickson, Murfesboro etc.
- Lastly, would anyone be able to offer a suggested price to rent ratio that we should be targeting when running numbers?

Any help would be greatly appreciated. We're very careful with our money and are just trying to explore options to set ourselves up as best as possible for the future while still being able to enjoy Nashville. Thank you!

[Dave Foster]

@Peter Apockotos, If you want to go fast - go alone.  If you want to go far - go together.  Great idea and the two of you can be the iron that sharpens each other in the process.

Don't know if you realize it but Inside your post you actually built some proforma.  Test it up against your potential purchases - 10% down means a $360K mortgage.  $100K underwater implies a 28% negative event downturn.  Other than the really crazy crash of 08 in spots 25-30% if a health downturn assumption.  But hold this up against product type, and flexibility in a down turn.

Sometimes there's not selling out.  And in a partnership you want as many exit and contingency strategies as possible.  This is why I'd be more inclined to recommend a course like @Gabriel Amedee is offering.  I love house hacking (Our family have done it for 26 years and it has added so much to the value of our lives in more than just financial ways) But a SF owned by two partners depending on in unit house hacking seems like a limiting strategy.  

Purchase duplex or 4 plex and live in one while renting the other (s).  If anything goes south then the entire model doesn't have to change.  You can simply move out and rent the empty unit.