What is the best approach to buying a house with my best friend?
Preface: I’ve read previous posts about buying a house with a friend and I’m perfectly willing and expecting to hear a cacophony of “DO NOT DO THIS” posts. And I’ll oblige to wear a dunce cap during this entire thing but here’s the scenario.
Body: My best friend and I, for all intents and purposes have been brothers for our entire lives. He lost his early, mine left the family for drugs etc. and it’s been me and him since I could remember. He’s working in the union, has always had a job and extremely stable income. He’s also rising through the ranks in his union. I’m a geologist and although financial hardships are possible I can not imagine any scenario where I’m without a job for more than a month or two. Employers seem interested in the work I’m doing and I have never gone on an interview without receiving an offer. Luck is sure to run out but let’s play this scenario out as if we both will always have income to cover our share of the house.
We currently live together and want to invest in a property together. We want to gain equity in the housing market while also gaining the tax benefit of mortgage payments.
I’ve told him of the materials I’ve read and have told him most of the suggestions on here.
- Having a contract signed as if we’re enemies and are going to fuck the other one over.
- Play out scenarios where one’s S.O. is over 5x a week and if and when they start paying rent & utilities.
- If one partner wants to move out and leave the other with the mortgage.
- Just in general to make sure all the realms of possibility are covered the legal language so we don’t have to ever quarrel.
My main questions for this are how to do this in the most equitable way. For instance, let’s run a scenario where we make a $50,000 down-payment ($25k each) for a $400,000 house. I ran some quick numbers and found that the mortgage would be about $1,100 each per month with a 20-year mortgage. If after 5 years ($66,000 each), he wants to move out, what are our best options?
- Can We just agree to sell the property and split our equity portion of the total house sale?
- Is one obligated to “buy” the other one out including half of the closing fee?
- Do we count half of the mortgage interest expected to be collected as part of the ‘buyout’?
In addition I have questions on an LLP vs an LLC. Are either considered a smart move when taking out a mortgage?
Please understand that when I see other posts people are warning them to protect themselves from being fucked over. Telling them to open up an LLC in their name and have the other pay them so they can’t get fucked over, etc. etc. This is not what I want. I want to make sure that my buddy is protected and will not be fucked over. Neither of us are looking for financial gain on this (besides market growth if at all). What we want is to make sure that we’re not paying rent anymore and can still live together.
Located in Long Island, NY.
Any and all help is truly appreciated. Now. Let me see those “DO NOT DO THIS” comments.