Shared Housing & Co-Housing

Do you have any experience with being a landlord? Do you feel comfortable going into business with close friends? (that is what buying a property together would be) Have you thought about what happens if one family wants to move or sell, but the other does not; or what happens if you own both units and want to move your MIL into the one occupied by your tenants/friends? It is all complicated; a few people do it, most commonly as TIC and then do a condo conversion as a way of divorcing the property. You sound like you are just beginning to think about this, so I'd encourage you to do a lot more thinking before commiting to a project.

We have just purchased a duplex with another couple in Oakland. We had started looking in Berkeley, but the economics did not work. A few thoughts:

-It took us much longer to find a property that worked for everyone than we'd originally anticipated. Bear in mind that the more people involved, the harder it will be to find a property that works for everyone.

-There are a good number of duplexes in Berkeley (and more in Oakland) but very few of them have two relatively equal units -- most have an owner's unit and a smaller in-law unit that's clearly a rental. Often the second unit is a dark basement or a very small ADU. So none of these properties worked for us -- you may run into a similar issue.

-Financing requirements are different for a multi-family than a single-family -- multi-family properties are considered higher risk, so they usually require a higher down payment and also have a higher interest rate.

-Also factor in the expense of hiring a lawyer who specializes in co-owned properties: you will want to have a contact with the family you co-purchase with, and there are many legal details you will encounter relating to ownership structure, title, etc. that you will want a lawyer's advice on.

-You will find that a good number of duplexes that interest you have current tenants -- this is another issue and expense to factor into your budget.

-The properties that would work for you as landlords renting vs. couples co-owning will likely be different properties. Before you begin your search, you will need a clear idea of which one you want.

-If you choose to co-own with another couple, you will need to apply for a mortgage together, and will essentially be business partners, with legally linked finances. This is a big deal -- make sure you are comfortable with this before you begin.

I am very happy with how things have turned out for us, but it is definitely harder and more complicated that I knew going in. Good luck with your search!

I agree with the answers you've received already. First and foremost, before starting a genuine search, decide whether you want to partner with another family to jointly purchase a property together or be willing to be a landlord, owning the entire property. I know this is your question, and I suggest not trying both on for size. Make an informed decision after considering what suits your needs. If purchasing jointly, everything involved in a mortgage loan will be shared with this other family, and can be complicated since both of you will have credit reviewed, financial information shared in the approval of the loan, etc. Also, if your goal is to have your MIL move in eventually, she would be moving into the unit that is owned by someone else - there would be an entire process of buying out the other family, or somehow coming to an amicable agreement that the family would be willing to depart a unit they own. Financially, it's helpful to have another partner share in maintenance and taxes, but can be complicated at the start of searching and when you'd like your MIL to move in. 

It is simpler to purchase a multi-family property on your own in terms of securing the mortgage loan and all title will be in your name; however, you would not be able to charge your tenants for maintenance fees and property taxes as their landlord, something to consider. In addition, as mentioned, prices of duplexes vary because often there is one vacant unit and one unit that is tenant occupied (and more often than not, a well-priced duplex is because that tenant is a long-term tenant paying very low rent), which you'll want to factor into how much the tenant will offset your mortgage. Look carefully at disclosures. Your ideal scenario is to find a vacant duplex, but those are far more rare, and you would be paying a premium in the purchase price of the property since you can set the rent for the other unit at current market rent. 

Also, an important thing to consider - if you do purchase a tenant occupied property and intend to do so with a partner/family, you would need to consider the challenges of an eviction process. I believe in Berkeley, the eviction process is one of the strictest in the Bay. I don't know the provisions of Berkeley's laws, but you will likely have to buy out the tenant and ensure all the legal processes are met before you can evict. Another thought about whether you want to be landlord v. partnered in a property, if a tenant-occupied property. 

If a reasonably priced property is a consideration (and I use "reasonably priced" loosely, this is the Bay Area!) - Berkeley properties are going for a significant amount over asking. You may consider a multi-family property in Oakland/North Oakland, depending on how strongly you want to be in Berkeley. Know that whatever the list price in Berkeley, expect to offer over asking. You are likely to offer over in Oakland as well, but the list prices do not start as high as in Berkeley. Be patient--it may take some time to find the right one--and look for something that's right for your family. Good luck!

Hello, 

You have gotten good advice about the legal aspects of this, and that's clearly so important.  I love the idea of some kind of co-housing arrangement (with separate living spaces) and considered purchasing a duplex with another couple many years ago. These were dear friends whom I trusted completely.  In the end, we did not find a good place to buy together and ended up buying separately.  I'm so grateful that it worked out that way.  The couple I was planning to do this with ended up getting divorced and having financial difficulties that I never would have anticipated.  I am still dear friends with the wife, but the husband also had significant mental health issues that contributed to the end of their marriage and my friendship with him.  If I had purchased with them, I would have been tied up in this, and they would have needed to sell their portion of the house. I think that the issues about this would have been damaging to our friendship and possibly also to my finances, and certainly to the planned co-housing arrangement.  At the time that I was thinking of doing this, there was no way to predict that this would happen.  It's true that anything can happen to any of us in life--and unknowns are part of what we all have to deal with.  But in buying together, you will be tied to this couple and their relationship and financial fortunes.  That may be just fine, or it may be a risk worth taking.  In my case, I had really not thought through the implications before hand. 

We have a multi-family property in Oakland, and previously lived as tenants in a multi-family property in Berkeley. We loved our Berkeley setup as tenants, but buying our own property and being landlords is very different.

We bought our property in Oakland with all the units occupied and had to do what is called an owner move-in in order to be able to live in one of the units. This required additional cash and a lawyer to execute correctly, so that is an additional consideration to think of when looking at properties with tenants.

Another thing to be mindful of is that the tenant rights in both Berkeley and Oakland are very progressive, which is good for the tenants but not great for landlords. Once you rent a unit out, it is typically very difficult to get tenants out, because of the nature of the laws. Just something to keep in mind.

Many years ago, I purchased a three unit building in SF with a friend.

- We knew that our lives would eventually change and agreed to an exit plan. Our goal was to convert the units into condos, which would lower our financial entanglement, ease the process of selling individual units as well as increase the value of each unit.

- We used a lawyer who was familiar with the condo conversion process who also provided CC&Rs (Covenants, Conditions & Restrictions) for our little HOA (home owners' association). The CC&Rs were the rules we agreed to and codified many, many, issues such as, not allowing short term rentals, division of common expenses, how work would be managed, etc... The most important thing that the attorney said to us was that it was important to communicate and work with my friend on the issues and the moment we had to pull out the CC&Rs to force the other person to abide by the rules was when the relationship starts to fail.

- Fortunately neither of us were totally maxed out financially to buy this building, remodel our units and keep up with the maintenance. We recently spent $50k to replace the roof. We also spent another $40k to fix dry rot and paint the exterior. I know of other small HOAs that struggle to do maintenance because one or more of the parties can't or isn't willing to pay.

- We both married (other people), had kids and moved to the suburbs. All the units are being rented and despite some stress, it has been worth it. Once all the kids graduate, both my friend and I, hopefully with our respective spouses, plan to move back. If we decide to sell, it'll be easier to sell individual condos.

- It was really terrific going though the process of buying a home with a friend vs doing it alone. While we lived in the building together, we had so much fun! When we were single, we had our own places but a friend always nearby. Even when we married and had babies, we could share that experience and it was just so easy and fun to hang out and support each other.

- I think that it helped that we were both financially secure, and partly because of that we could be generous with each other and not have to make everything "fair" (because what's fair to you might not be fair to me). It also helped that neither of us always needed to win. The fact that there were just two of us at the start made things much easier. The more people involved, the harder it would have been.

I hope you can make it work. I know of at least two other couples who did what you are thinking of and they raised their kids all the way through college. One family had a great time and the other family had partners who divorced and that made things unpleasant for many years.  Good luck!!