House hunting idea: two households band together and buy a two-family house together. Massachusetts allows owners of two-family and three-family houses to convert them into two or more condos. This is not typical in other parts of the country. There are lots of advantages to buying a two-family house, especially in our high-price condo market.
Pearl Emmons helped two households buy a two-family house this summer. Their friends-compound closed in July. They even managed to have a backyard closing (which is a first for us, Covid-19!)
Advantages of two households buying one house:
- Availability at a lower cost, per square foot. Given the high demand in this area, this has led to developers buy two family houses, renovate them, and reap large profits. That makes it difficult to find condos that are not already renovated (and therefore too expensive).
- Pick your own neighbor. Small condo associations are self-run in the vast majority of properties. That means you will be making maintenance decisions regarding the exterior and common areas with the other owner. Buying a two-family house with a co-owner allows you to choose that co-owner.
- Control your renovations. If you own a unit in a two-family house, you can renovate it on your schedule, to your taste, over time.
- Convert to condos, anytime. If you buy the property as a two-family house, you can convert it to condos at a later date. This postpones the fees to do that work until a time when you might want the property deeded that way.
Things to consider before buying with another household:
When more than one household of clients come to us looking to buy a multi-unit property, we counsel them. There are a lot of decisions to make before and during house hunting that will set the stage for a happy partnership.
- Division of property for the initial purchase. If you are buying a two-family home, chances are one unit is slightly or considerably bigger than the other. There will also be condition differences. How do you divide the difference in terms of price? We provide you with market information to help you create an agreement, in principle, that you can use to divide the cost of the purchase fairly.
- Mortgage liability and resale. If you purchase as a two family and do not convert to condos, you are jointly responsible for the mortgage. What happens if one of you die? What happens if one of you wants to sell? If there is a loss or profit when you sell? We discuss how to make a plan for the most common changes that could happen during the time of your ownership. That way, you have an idea of what you want your attorney to draft in your partnership agreement. (See below.)
- Condo conversion. After you buy, you may or may not want to divide the house into condos. We discuss the pros and cons, and outline the usual expenses.
- House rules. Whether there is a condo association or not, you need rules for the common areas. Make them before you house hunt. It is a good way to know if you really should be living together.
You will need an attorney. You may even need two (one for each party).
Legal marriage confers rights to both parties, if they own property together. When the right to marry was restricted to heterosexual couples, there were attorneys who became very good at helping non-married partners buy houses together, and retain their individual rights. The same principles apply to this situation. If you are not married to the other owners, you need a partnership agreement.
You will be signing a joint mortgage. What happens if one household can’t or won’t pay?
One household may pay a larger part of the initial down payment. How does that investment transfer, over time? Will the other household increase their equity to even it out, or will it be evened out at the point of sale?
Will you require life insurance for all the mortgage-payers? How will equity in the house transfer in the event of someone’s death?
See why you need an attorney or two? We can help you think about these things, but an attorney will write it all down.