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Why Co-Buying Is a Fast but Risky Real Estate Investment Strategy
As property prices soar and interest rates remain stubbornly high, more buyers—especially first-timers—are turning to creative solutions to get their foot in the door. One strategy gaining popularity is co-buying, where two or more people pool resources to purchase real estate together.
It’s a promising way to overcome affordability barriers in expensive markets—but it’s not without risks.
Why Co-Buying Is Gaining Momentum
With the average age of first-time homebuyers now at 38, up from 35 just a year prior, and median incomes for buyers nearing six figures, traditional homeownership is increasingly out of reach. In response, a growing number of Americans are turning to co-buying as a practical workaround.
According to data from Cobuy.io, 30% of home sales now involve multiple buyers, with a notable rise in non-married co-owners—particularly in high-cost states like California, New York, and Washington.
What’s Driving the Trend?
Co-buying offers several key advantages:
Shared Costs: Buyers split the down payment, mortgage, insurance, and maintenance.
Easier Financing: Joint income and credit profiles help secure more favorable loan terms.
Portfolio Growth: Some co-buyers rotate through owner-occupied properties, then convert them into rentals—using FHA loans to fast-track growth.
Divided Duties: Repairs, renovations, and property management can be shared.
For buyers struggling to compete solo in a pricey market, it’s an appealing entry point into real estate investing or ownership.
The Hidden Risks of Co-Buying
Despite the benefits, co-buying isn’t a decision to take lightly. Without proper planning, things can fall apart quickly—both financially and personally.
Key Challenges to Watch For:
Disputes and Miscommunication
Whether you live together or not, poor communication can lead to misunderstandings that put your investment at risk.No Exit Strategy
What if one partner wants out? Without a buy-sell agreement, refinancing or selling can become complicated—or impossible.Uneven Financial Stability
If one buyer experiences job loss or financial trouble, the other may be stuck covering the full mortgage—or risk foreclosure.Mismatched Goals
One buyer might want to flip quickly, while the other is in it for the long haul. Clear alignment upfront is essential.
Set the Foundation: Co-Buying Is a Business Partnership
Think of co-buying not as a handshake deal—but as a formal business agreement. Just like in a startup, clearly defined roles, responsibilities, and exit plans are non-negotiable.
Your Agreement Should Cover:
Ownership percentages
Mortgage responsibilities and expense sharing
Equity distribution and use
Buyout clauses
Terms for selling or refinancing
Dispute resolution procedures
Without these details, even small disagreements can lead to legal battles or forced sales.
One buyer who co-purchased a $2.8 million brownstone in NYC summed it up best:
“We weren’t roommates—we were co-owners. A clear legal structure protected both our friendship and our finances.”
Plan for the Money—Not Just the Property
Co-buying isn’t just about getting a mortgage; it’s also about building long-term wealth. That means planning how to use cash flow and equity:
Will profits be reinvested or paid out?
Will equity be used to leverage new deals?
Are personal withdrawals allowed—or off-limits?
Setting clear financial boundaries from the start helps avoid conflict down the road.
Co-Buying Can Work—If You’re Strategic
For unrelated co-buyers, it’s often easier to co-invest without cohabiting. But if you do plan to live together, assign clear roles and responsibilities—and have a plan for moving out or selling.
Whether it’s a duplex, a small multifamily, or a single-family with roommates, the principle remains the same: good intentions aren’t enough—put everything in writing.
Final Thoughts: Partner Up with Caution
Co-buying can be a powerful way to enter real estate or grow your portfolio faster. But it’s not a shortcut around due diligence.
Before co-purchasing a home:
Vet your partners like you would vet a property deal
Put all agreements in writing—don’t rely on verbal promises
Plan for all outcomes, including the worst-case scenario
Real estate partnerships can bring great rewards—but they can also unravel quickly if you’re not prepared. The upfront work of building a solid co-ownership structure is the best investment you’ll make in the entire process.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“
Why Co-Buying Is a Fast but Risky Real Estate Investment Strategy
Has the U.S. Housing Market Finally Begun to Thaw After the Pandemic?
It seems like the housing market might be showing signs of life. According to a recent report from Redfin, pending home sales in early October have seen their largest year-over-year rise since 2021, with a 2% increase in the four weeks ending October 6.
This news is likely to be welcomed by real estate investors who have felt the market has offered limited opportunities over the past few years. However, it’s important to take a cautious approach—one promising statistic doesn’t necessarily indicate a broader trend.
Is the Housing Market Truly Recovering?
Let’s explore the different factors at play.
Interest Rate Reductions: A Critical Factor or a Red Herring?
The Redfin report links the surge in pending sales to the Federal Reserve’s much-anticipated rate cut announcement in mid-September. According to Redfin, this announcement prompted buyers to re-enter the market in late September, despite mortgage rates having already been falling for weeks before the cut.
This psychological boost is crucial. Although buyers were aware of the falling rates beforehand, many seemed to be waiting for a formal signal to act. This could be attributed to a lingering fixation on the ultra-low rates of 3% to 4% that buyers enjoyed before 2022.
Any rate cut announcement serves as a nudge for prospective buyers, making them feel that now might be the right time to purchase, even if mortgage rates had been decreasing already. In an unstable mortgage market, such announcements hold significant influence.
However, mortgage rates are just one piece of the puzzle when analyzing housing market performance. As noted by Investopedia, the real estate market is driven by four primary factors: interest rates, demographics, economic conditions, and government policies.
Demographics: Shaping the Market
During the pandemic, demographic shifts had a profound effect on U.S. real estate, with major population movements like the Sunbelt migration fueling booms in cities such as Phoenix and Austin, which later became unaffordable for many.
Age is another key demographic factor, and the millennial generation’s pent-up demand continues to be a driving force behind the rise in home purchases. Despite the challenges of the past few years, millennials who have longed to become homeowners are now entering the market in greater numbers, as more properties become available.
Rising Inventory: A Sign of Stabilization
A key factor contributing to the market’s stabilization is the growth of housing inventory over the last year. The pandemic had a significant impact on the availability of homes, with sellers hesitant to list properties due to COVID-19 restrictions and, later, higher mortgage rates.
Some homeowners, particularly those upgrading to larger homes, found it financially challenging to sell and take on higher mortgages. Others, however, simply chose to wait for a more favorable market.
Although the latest Realtor.com report shows that inventory remains down by 23.2% compared to pre-pandemic levels, we are seeing an upward trend. For instance, new listings have been rising since last year, with a 5.7% year-over-year increase for the four weeks ending October 6.
As of September 2024, some states have even surpassed their pre-pandemic inventory levels, including Tennessee, Texas, and Idaho, with others, like Washington, close behind.
Vulnerabilities in Certain Regions
However, not all regions are showing positive signs. For example, some areas, particularly those affected by extreme weather, have seen inventory spikes not because of market recovery, but due to homeowners trying to offload damaged properties they can’t afford to repair.
For instance, regions like Florida and North Carolina, hit by hurricanes, have experienced increases in home listings, but these may reflect a response to climate-related challenges rather than market health.
Opportunities for Investors
Investors should be discerning when choosing markets, focusing on regions where inventory is growing due to increased home construction rather than climate-related distress. States like Idaho, Utah, North Carolina, and Texas, which are building new homes, offer potential, though caution is needed in areas prone to natural disasters.
The Midwest and Northeast, meanwhile, still face significant challenges in recovering to normal market conditions. These regions have lower rates of new construction, meaning inventory remains scarce, which could present both opportunities and difficulties for investors.
The Bottom Line
The U.S. housing market is showing signs of recovery, but the situation remains complex and varies by region. Interest rates play an essential role in unlocking the market, but investors should also consider other critical factors, such as homebuilding trends, climate risks, and government policies. While the market is heading in the right direction, it’s crucial to examine regional differences carefully before making investment decisions.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“