Should I Co Own Real Estate: 20 pros and cons to buying property with another person

Pros and cons of buying a property with multiple people

Buying a property with another person can be difficult to understand before you fully think about the pros and cons. There are several major benefits to buy a property with another person, but there are also several cons and negatives about buying a house in this way.

The point of this article is to point out the clear 20 pros and cons, from others' experiences. This way you can make the best decision possible.

We broke down the pros and cons thinking about taxes, management, and emotional decision making. The table below also breaks things down quickly.

Pros	Cons
Shared Financial Burden	Disagreements Over Decisions
Increased Buying Power	Unequal Contributions
Diversification of Investment	Complicated Taxes
Shared Management Responsibilities	Difficulty Selling
Tax Benefits	Liability Issues
Learning Opportunity	Emotional Strain
Potential for Higher Returns	Uneven Use of Property
Easier Entry into Real Estate Investment	Difficulty Getting Loans
Emotional Support	Complications if an Owner Dies
Flexibility in Ownership	Limited Control

Pros of co owning real estate

Shared Financial Burden

When you co-own real estate, you don't have to bear the full cost of buying and maintaining a property on your own. You can split the down payment, mortgage payments, property taxes, and other expenses with your co-owners. This makes it easier to afford a nicer or bigger property than you could on your own. For example, if a house costs $300,000, you might only need to pay $150,000 if you co-own it with one other person.

Increased Buying Power

By pooling your money with others, you can afford to buy properties in better locations or with more desirable features. This can lead to better investment returns in the long run. For instance, you and your co-owners might be able to buy a property in a prime location near good schools or popular attractions, which could increase in value faster than a cheaper property in a less desirable area.

Diversification of Investment

Co-owning multiple properties allows you to spread your investment across different locations or types of real estate. This can help reduce your risk if one property doesn't perform well. For example, you could co-own a residential property in one city and a commercial property in another, so if the housing market in one area slows down, you still have income from the other property.

Shared Management Responsibilities

When you co-own a property, you can divide the work of managing it. One person might handle maintenance issues, while another deals with tenants or paperwork. This can make owning real estate less stressful and time-consuming. You could create a schedule where each co-owner is responsible for different tasks each month, making sure the workload is evenly distributed.

Tax Benefits

Co-owners can often take advantage of tax deductions related to property ownership, such as mortgage interest and property tax deductions. These deductions can be shared among co-owners, potentially lowering each person's tax bill. For instance, if you pay $10,000 in property taxes and mortgage interest, and you have one co-owner, you could each deduct $5,000 on your taxes.

Learning Opportunity

Co-owning real estate can be a great way to learn about property investment, especially if you partner with someone who has more experience. You can gain valuable knowledge about the real estate market, property management, and financial planning. This knowledge can be useful for future investments or even in managing your own home.

Potential for Higher Returns

By combining resources, co-owners can often invest in properties with higher potential returns. This could include properties that need renovation or are in up-and-coming areas. For example, you and your co-owners might buy a fixer-upper, invest in improvements, and then sell it for a profit or rent it out for more money.

Easier Entry into Real Estate Investment

For many people, the cost of buying property on their own is too high. Co-ownership makes it possible to start investing in real estate with less money upfront. This can be especially helpful for younger investors or those just starting out. You might be able to buy your first investment property years earlier than if you had to save up all the money on your own.

Emotional Support

Owning property can be stressful at times, especially when dealing with unexpected repairs or difficult tenants. Having co-owners means you have partners to share these challenges with, which can provide emotional support and reduce stress. You can talk through problems together and come up with solutions as a team.

Flexibility in Ownership

Co-ownership agreements can be structured in many different ways to suit the needs of the owners. This can include options for buyouts, rules for selling shares, or agreements on how to use the property. For instance, if you co-own a vacation home, you could agree on how to divide the time you each get to use it, or set up a system for renting it out when no one is using it.

Cons of co owning real estate

Disagreements Over Decisions

When you co-own property, you have to make decisions together. This can lead to arguments about things like when to sell, how much to spend on repairs, or whether to allow pets if you're renting it out. For example, you might want to sell the property to make a profit, but your co-owner might want to keep it for steady rental income. These disagreements can cause stress and damage relationships.

Unequal Contributions

Sometimes, one co-owner might not be able to pay their share of expenses or might not put in as much work managing the property. This can create resentment and financial strain for the other owners. If your co-owner loses their job and can't pay their part of the mortgage, you might have to cover their share to avoid foreclosure.

Complicated Taxes

Co-owning property can make your taxes more complex. You'll need to figure out how to split tax deductions and how to report rental income if you're renting out the property. This might require hiring an accountant, which is an extra expense. Plus, if one co-owner makes a mistake on their taxes, it could cause problems for everyone.

Difficulty Selling

When you want to sell a co-owned property, all owners usually need to agree. If one person doesn't want to sell, it can hold up the process. Even if everyone agrees to sell, you might disagree on the asking price or which offer to accept. This can lead to missed opportunities in the real estate market.

Liability Issues

If something goes wrong with the property, all co-owners could be held responsible. For instance, if someone gets hurt on the property and sues, all co-owners might be named in the lawsuit. This means you could be at risk for problems you didn't directly cause.

Emotional Strain

Co-owning property with friends or family can put a strain on your relationship. Disagreements about money and property management can lead to hurt feelings and damaged relationships. What started as a fun investment idea with your best friend could end up ruining your friendship.

Uneven Use of Property

If the property is something like a vacation home, there might be conflicts over who gets to use it and when. One owner might feel they're not getting their fair share of time at the property, leading to resentment. You might find yourself arguing over who gets to use the beach house during the best weeks of summer.

Difficulty Getting Loans

When you co-own property, it can be harder to get loans for other purposes. The property will show up as a liability on your credit report, which might make lenders less likely to give you other loans, like for a car or your own home. This could limit your financial flexibility in the future.

Complications if an Owner Dies

If one of the co-owners dies, it can create legal and financial complications. The deceased owner's share might pass to their heirs, who may not want to be involved in the property. This could force a sale of the property or lead to difficult negotiations with the new co-owners.

Limited Control

When you co-own property, you don't have full control over it. You can't make major decisions without the agreement of your co-owners. This lack of control can be frustrating, especially if you have strong ideas about how the property should be managed or improved. For example, you might want to renovate the kitchen, but if your co-owners don't agree, you can't move forward with your plans.

Should you co own a property with another person?

Co-owning real estate can be a powerful way to enter the property market or expand your investment portfolio, but it's not without its challenges. As we've explored, there are significant advantages, from sharing financial burdens to increasing buying power and diversifying investments. These benefits can make real estate ownership more accessible and potentially more profitable. However, the drawbacks are equally important to consider. Disagreements, unequal contributions, and complicated legal and financial issues can strain relationships and create stress. Ultimately, the decision to co-own property should be made carefully, with a clear understanding of both the opportunities and risks involved. It's crucial to choose your co-owners wisely, establish clear agreements, and maintain open communication throughout the partnership. By doing so, you can maximize the benefits of co-ownership while minimizing potential conflicts, setting the stage for a successful and rewarding real estate investment experience.