September 6, 2008 - "Can't afford a house? Think about becoming a Co-Ho"
Summary: It's becoming harder and more expensive to own a house. Want to take advantage of this soft real estate market but can't afford to buy a house by yourself? Think about becoming a Co-Ho!
With home prices increasing to all time highs--even in this last housing
crisis, home mortgage payments are still a record percentage of people's
incomes--should we be worried about the prospects of being able to afford a
house or finding an investment property? Buying a house can be one of the
best investments that you make. Long-term home owners have never lost
money on their homes and there are a number of tax write-offs and incentives
for people to buy homes. Many people also want to invest extra money they
may have in real estate. However, how can you accomplish these goals at a
relatively young age?
Time Magazine ran an article August 21 about the increasing number of
college students that are buying houses with friends. By splitting the costs
of owning a house, young people are able to buy houses without having to
accumulate the normal level of savings they would otherwise need to have, and
are thus able to become homeowners with all of its advantages right out of
college.
The article highlights, "This is the story of friends--just
friends--who buy houses together because they are young and don't have a lot of
money but smell opportunity in a soft real estate market and want to start
building equity ASAP, even if it comes before the wife, kids and golden
retriever. "On my own, I might have been able to buy a one-bedroom condo,
but that would have been pushing it," says Kovack. Instead, he and Katz
live in a 2,300-sq.-ft. (about 215 sq m) three-bedroom row house with
stainless-steel appliances and a deck out back. They split the mortgage, the
tax break, the cost of upkeep--and the pride of being homeowners a few years
out of college. "
The article also highlights the importance of having a pre-made agreement as
a contingency to solve potential problems. For example, a pair of Co-hos
in the article have a 25-page agreement that spells out everything from how
they pay for home repairs (fifty-fifty all the way) to what happens if one of
them gets married (the husband has no claim on the house) or dies (the
surviving owner has the right to buy the other half before it goes to next of
kin). "People are friends, and they're honest people, but situations
change," says Andy Sirkin, a real estate lawyer whose firm crafted the
agreement. "You need to be ready."
Finding a friend to buy a house with can help you live in a better house,
buy an investment property in a soft real estate market you otherwise couldn't
afford, and help you take advantage of the tax incentives and investment
benefits of owning a house. If you can't afford a house by yourself,
consider becoming a Co-ho.
