Q: We moved a year ago from the sane real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements. market of South Carolina to the insane real estate market of Southern California. We have become really good friends with another couple with young children, and we are all fed up with apartment life.
We’re considering going in jointly to purchase a duplex giving us the comfort of owning a home, but payments that won’t break the bank.
How do we approach a lenderA Lender is a person, company, corporation, or entity that lends money for the purchase of real estate. to do this? And what legal concerns do we need to handle in advance? The market is so hot here we know that we could easily rent the unoccupied half of the duplex if either of us decided to move on.
But I’m sure going into a deal like this is more complicated than it appears.
A: Of course it’s more complicated.
If you both want to own (as opposed to you purchasing the property and renting to your friends), then you need to look for a multi-family building that has at least two units.
Before you do anything, think this through carefully before you do it. What happens if your neighbors fail to make the mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. payment? Your credit could be tanked along with theirs. What if they simply disappear one night? You’d be on the hook for everything but wouldn’t own the property outright.
You should think about how you and your friends want to own the property. You can buy the property as tenants in commonTenants in Common is a type of ownershipOwnership is the absolute right to use, enjoy, and dispose of property. You own it! in which two or more parties have an undivided interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds. in the property. The owners may or may not have equal shares of ownership, and there are no rights of survivorship. However, each owner retains the right to sell his or her share in the property as he or she sees fit. or joint tenants. Or, you can hire an attorney to help you subdivide the property legally and turn your building into a condominium.
What’s nice about turning your property into a condominium is that you separate the legal ownership of the property. You can sell at any time without consulting your neighbors and they can do the same. It doesn’t get as messy.
Although attorneys are not normally used to purchase property in California, you should hire a real estate attorneyA Real Estate Attorney is an attorney who specializes in the purchase and sale of real estate. to help you work through the issues relating to co-ownership of property. Often, individuals in your situation will draft a partnership agreement that spells out the nitty-gritty details of the ownership, management and financial responsibilities of each party.
Finally, spend some time with your friends discussing what kind of property they want, what is their neighborhood of choice, and how you can make this work out well for everyone.
Jan. 19, 2009.