Multi-Family Housing: Two Families, One House?

Added February 6, 2004 by Ilyce R. Glink

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Summary: At first blush, multi-family housing makes a lot of sense. Move in with your friends and split your mortgage in half. Lenders even offer special multi-family financing. But it's not something to jump into too quickly. Make sure you're on the same page when it comes to the mortgage and maintenance. If you're buying this multi-family building as partners with the idea of converting it later into separate ownership (like a condo), then you should have an attorney draw up a partnership agreement that spells out these issues and others, like what happens if one family decides to sell.

Q: I wonder if you can suggest any resources for my situation.Ãƒâ€šÃ‚Â My wife and I currently live in a co-op, where we have made good friends over the last 2 years.

We are exploring the idea of buying a multi-family house together, since the single-family market is so overpriced right now.Ãƒâ€šÃ‚Â What are the potential pitfalls?

A: Even though you know this family pretty well, you probably don't know what goes behind their closed doors. But if it's just you and them living in a two-family building, you're going to find out fairly quickly.

Before you make this move, you and this other family have to come to terms with issues like location, insurance, who is going to handle the daily maintenance (gardening and snow-removal, for example) and special maintenance, like a new roof. You might find that your idea of maintaining property is very different from your neighbor's.

If you're buying this multi-family building as partners with the idea of converting it later into separate ownership (like a condo), then you should have an attorney draw up a partnership agreement that spells out these issues and others, like what happens if one family decides to sell.

Buying together means you'll be linking your financial and social lives together, which can work out beautifully or terribly, and rarely somewhere in between. Can you trust this family to live up to their mortgage and maintenance obligations? If not, the lender won't care. The company will simply come after you, and possibly ruin your credit.

Finally, make sure you find a real estate agent who can help you and this other family determine what is most important (wants vs. needs) while considering issues like schools, crime, and potential for price appreciation.

I hope this turns out the way you planned. Personally, I think you're walking into the lion's den.

Published: Feb 6, 2004

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