With rising housing costs and the need to share expenses, more people are choosing to co-own homes with friends, relatives, or significant others instead of a spouse. When considering smart moves for buying a home with a friend or family member, it is essential to note that while this can be a practical and financially beneficial arrangement, it requires careful planning to avoid potential disputes and legal complications. Therefore, understanding the smart moves for buying a home with a friend or family member is crucial to making informed decisions.
Why More People Are Choosing Co-Ownership
Data from Zillow shows that 62% of homebuyers share ownership with at least one other person, but only 50% co-buy with a spouse or partner.1 Others purchase with friends (14%) or relatives (12%), with affordability being a key reason.2
Co-owning a home can make homeownership more accessible, but it’s crucial to establish clear expectations and legal protections to prevent conflicts down the road.
Key Considerations for Co-Ownership
Here are some things to consider for smart moves when buying a home with a friend or family member. Before purchasing a home with someone other than a spouse, discuss the following essential topics:
- Financial Contributions – How will you divide the down payment, mortgage, taxes, and maintenance costs? Will you open a joint account for expenses?
- Exit Strategy – What happens if one co-owner wants to sell their share? Will the other have the first right to buy out their portion?
- Death or Incapacity – How will the property be handled if one owner passes away or becomes incapacitated? Does the ownership structure align with your estate plans?
- Property Use & Responsibilities – Will the home be a primary residence, vacation home, or rental? How will maintenance and repairs be handled?
- Dispute Resolution – How will disagreements be settled? Mediation or arbitration clauses can help prevent costly legal battles.
A co-ownership agreement or a co-habitation agreement should outline these details, protecting all parties involved.
Choosing the Right Ownership Structure
How you hold title to the property impacts what happens if a co-owner dies or wants to sell. Ownership structures vary by state, so consult an attorney before making a decision.
- Joint Tenancy with Rights of Survivorship – Each owner holds equal shares, and when one dies, their share automatically transfers to the surviving owner(s). This is common for spouses and close family members but may not be desirable in every situation.
- Tenancy in Common – This is the default type of co-ownership in Colorado. Each owner has a specific percentage of ownership, which does not automatically transfer to the other owner(s) upon death. Instead, it passes to their heirs or designated beneficiaries. This structure offers more flexibility, especially for friends or investment partners.
With a Tenancy in Common – a will or trust allows you to decide who will inherit your ownership interest in the property if you pass away.
Protecting Your Interests with a Co-Ownership Agreement
Here are some considerations for smart moves when buying a home with a friend or family member. A property deed alone doesn’t cover all co-ownership issues. A co-ownership agreement should clearly outline:
- Financial Obligations – Who pays for the mortgage, taxes, insurance, and maintenance?
- Usage & Access – How will owners schedule use of a vacation home or handle guest policies?
- Maintenance & Repairs – Who is responsible for repairs and upkeep? Will there be a joint fund for expenses?
- Buyout & Sale Provisions – What happens if one owner wants out? Will the other co-owners have the first right to buy their share?
This agreement should be reviewed regularly and updated as circumstances change.
How Estate Planning Affects Co-Owned Property
Estate planning plays a critical role in co-ownership. Consider the following:
- Tenancy in Common – If you own property this way, your will or trust would should specify who inherits your share. If your co-owner also has a will, coordinate to prevent conflicts.
- Joint Tenancy – Your share automatically passes to the surviving owner(s), but including contingency plans in your estate plan is wise.
- Trust Ownership – Placing your share in a trust can help avoid probate and control what happens to the property after your death.
- Life Insurance – A policy can help your co-owner cover mortgage payments or buy out your share if needed.
- Dispute Resolution & Inheritance Conflicts – Your estate plan can include mediation clauses to prevent disputes among heirs.
Final Thoughts: Secure Your Home and Your Future
Co-owning a home with someone other than a spouse can be a smart financial move—but only if it’s structured properly. A clear co-ownership agreement and estate plan can help protect your investment, rights, and relationships.
Contact us today to ensure your estate plan is legally sound and protects your interests.
- Manny Garcia, Buyers: Results from the Zillow Consumer Housing Trends Report 2023, Zillow (Aug. 23, 2023), https://www.zillow.com/research/buyers-housing-trends-report-2023-32978. ↩︎
- Id. ↩︎
