Friends split a mortgage, share a home to beat high housing costs

Sara Kemper and Betsy Ohrn have been besties since first grade, so they've shared a lot through the years: even the mortgage on a St. Paul house that's much larger and grander than anything they could have afforded individually.

"We needed something we could grow into," said Kemper, recalling the house-shopping wish list she, Ohrn and their respective boyfriends created. "The house we bought was especially appealing because it had enough space for both couples to have their own private living quarters."

Kemper and Ohrn — who are readying to sell that house now that each is married with two kids and has enough equity to buy their own abode — are among a growing number of cash-strapped buyers who have pooled their savings and incomes to purchase a home together.

With housing costs at an all-time high, about a quarter of all single and never-married buyers last year purchased a home with a friend or relative, according to Zillow.

"The world is too expensive now," said Skylar Olsen, chief economist at Zillow. "People still want to access real estate to live in but also as an investment, but it's harder to access, so they will co-buy with a friend or relative."

Though co-buying isn't without personal or financial risk, the practice has been especially helpful to buyers now that mortgage rates are teetering near 7%, enabling these buddy-buyers to double up on their down payment. On average, Olsen said, it took buyers in the Twin Cities metro more than seven years to save enough money to make a 30% down payment on a house.

"That's kind of no joke for a lot of folks," Olsen said.

Shared space, responsibility

For Kemper and Ohrn, the idea surfaced several years ago when they were out for a walk and lamenting the high cost and shortage of decent starter houses.

Combining forces made sense, as they realized they could share all the expenses — and obligations — that came with homeownership, including snowblowers and lawn mowers.

"We got more excited about the idea because we realized we could get double the square footage for less than double the cost of two houses," Ohrn said.

At the time, Ohrn was dating Tye Schulke, and they were renting an apartment in south Minneapolis. Kemper was dating Sean Boley, and they were living in a small house in the Hamline-Midway neighborhood in St. Paul.

"We were all looking for more space at about the same time and were frustrated with how quickly houses in the $200,000 to $350,000 range moved and seemed way overpriced relative to more expensive and nicer houses," Boley said.

With a much larger budget than each could have managed alone, the foursome set a $500,000 to $700,000 price range that afforded the group far more options.

"Basically, trying to double what our price range had been when we were looking separately," Schulke said.

The house needed to have a couple of bedrooms with en suite bathrooms that could both function as primary bedrooms. They found that and more in a three-story Victorian home their friends refer to as the "Marshall Mansion."

One couple live in the main primary bedroom suite on the third floor while the other live on the second floor, which has a bedroom with an en suite bathroom and an additional space used as an office and TV room. Each couple also have an additional bedroom on the second floor initially used as a guest room for each, but those rooms transitioned into bedrooms for the kids.

They share other space in the house, including an extra bathroom that's mostly for the kids. Most of the first floor is communal as well.

Splitting and selling

To maintain civility — and legal protections — Greg Mason, CEO of Edina Realty and former general counsel for the company, recommended hiring an attorney who can draft a contract and/or ownership agreement that addresses the purchase, use and sale of the property.

"With a partnership like that, you need to have a clear written agreement of what happens in a breakup or if one wants to sell to the other," he said. "You have to have a clear document going into that to do it the right way."

At the outset of their adventure, Kemper, Ohrn and their partners created two key documents that have helped them successfully navigate their unconventional situation. Legally, they are "tenants-in-common," which is a common form of ownership often used for unrelated owners. And with the help of a friend's dad, who is a lawyer, they also crafted a "housing agreement," which covers most practical aspects of managing the house and living together.

"We ended up writing out a simple Google Doc that stipulated the rules and what would occur if one couple decided they wanted out," Schulke said. "Our No. 1 rule throughout this adventure was that our friendship comes first. If at any time someone was feeling uncomfortable with the arrangement, we worked to have house meetings and come to agreements."

They share all of their food, take turns going to the grocery store and cooking one or two times a week. They split chores, including snow shoveling and watering plants, using a "chore draft" that lets everyone pick the tasks they most want to do.

They all contribute to a joint checking account to pay for the mortgage, food, utilities and other group expenses.

"Trust is also huge," Kemper said. "In a way, it's kind of like marrying your friends. You're saying, 'I trust and love you enough to take this big risk with you. I'll have your back if you have mine.'"

The foursome, who were all in their early 30s when they moved in together, said the situation worked out mostly as planned. During the COVID-19 pandemic, they found themselves already living in an established pod. All the economies of scale they had envisioned worked, too, including having one Netflix account and one Instant Pot. And once kids arrived, they were also able to share child care.

"Everyone has to be on the same page up front about how these arrangements will work," said Jeff Feldman, a sales agent who's had several co-buying clients. "You've got to look at it as a business proposition."

Going it alone

Feldman and his business partner, Joe Allen, said co-buying seems to be more common in part because people are staying single longer, increasing the relevance of the approach for those who don't want to wait until they have a romantic partner before they start investing in real estate.

"You've got to believe that there's going to be more of this with the affordability crunch we're in right now," Allen said.

More than a quarter of all potential homebuyers polled during a recent national survey by Re/Max said they were considering buying with friends or family members to help with affordability.

"That's what got us into real estate," said Jt Williams, who bought a big house in northeast Minneapolis several years ago with Dan Kenney, a friend from high school.

The house was big enough to rent rooms to other friends, covering the cost of the mortgage. They used the equity they earned from that house to buy two rental properties.

Though Williams' father is an accountant who was able to help them manage their expenses, they didn't draft an ownership agreement that might have helped avoid problems down the road. That lead to a variety of conflicts about how they navigated other aspects of ownership.

"There were major ups and downs. We yelled at each other a lot," Williams said.

Eventually, like Kemper and Ohrn, both Williams and Kenney married and moved out of their communal house. But they kept it as a rental. Despite the disagreements, their friendship survived, and they only recently made the decision to sell all three of their co-owned properties, enabling each of them to reinvest the profits in property they own with their respective spouses.

"The money we're walking away with isn't significant," Williams said. "But it provides a nice buffer to do this independently."