Property Partners

Buying a home together isn’t always a sweetheart deal; it can also be a great business opportunity between friends.

BY CHUCK GREEN

MORE AND MORE people who are looking to become real estate investors, prior to saying their vows, are finding ways to avoid investing in property solo.

Ever the businessman, Chris Pendarvis jumped at the opportunity to purchase a town house in Sacramento a couple of years ago with a former business partner. Although they kept the property for a relatively short time, Pendarvis believes he got a bang for his buck.

“It was a good deal, and we ended up turning it around aft er about a year,” he says. “We used the money we made to capitalize the back end of a coff ee house. So it was a nice way to help us build the business and at the same time provide a tax shelter.”

According to the 2006 National Association of Realtors’ Profile of Home Buyers and Sellers, 7% of homebuyers are unmarried couples.

Elizabeth Weintraub, a Sacramento real estate agent, admits she wouldn’t follow a similar route. “If I were single, I’d never buy a home with a friend,” she says. “I’d live in a smaller home, or in a worse part of town, before going into partnership on a home.”

But Pendarvis believes he was the perfect candidate and that he would do it again with just about anyone. “You might not play the market or do real estate development, but home ownership is important,” he says.

Unlike Weintraub, Lois A. Vitt, PhD, founding director of the Institute for Socio-Financial Studies in Virginia and author of 10 Secrets to Successful Home Buying and Selling, calls investing in a residence with someone other than a spouse or significant other “good business”—as long as the friend or business associate shares the same investment motives. “[Partners] need to have compatible goals and expectations so they can together analyze trends in the general economy, run the numbers under diff erent scenarios, and know the local housing sales, mortgage and rental markets,” Vitt says. “That doesn’t mean they can’t split up these tasks, but they have to be able to work together to achieve a single set of investment goals.”

At the same time, Vitt says there are drawbacks and issues some people should consider. “What happens if their individual circumstances change and one partner wants to sell and the other does not? What happens if the market tanks and one partner wants to ride it out but the other wants to cut his or her losses?” she says. “Partners—including spouses and significant others—should discuss these potential circumstances thoroughly and know that they can work together in any housing market for their mutual benefit.”

At the same time, Vitt says there are drawbacks and issues some people should consider. “What happens if their individual circumstances change and one partner wants to sell and the other does not? What happens if the market tanks and one partner wants to ride it out but the other wants to cut his or her losses?” she says. “Partners—including spouses and significant others—should discuss these potential circumstances thoroughly and know that they can work together in any housing market for their mutual benefit.”

When Jim Goodykoontz learned the owner of the fourplex in Sacramento, where Goodykoontz resided in a unit, wanted to sell the property several years ago, he thought it was a golden opportunity to invest in real estate. But because of the high down payment required, he needed a partner in order to make a transaction happen. So, in stepped his brother, with whom he knew he could work eff ectively.

And it certainly has proven to be a mutually beneficial deal for the brothers. “[The building has] appreciated quite a bit in value,” Goodykoontz says. “And we’ve been making a profit from the beginning. The rents pay the mortgage and then some.”

Although she would not buy property with a friend, Weintraub does acknowledge the difficulty of purchasing a home independently “With the aff ordability index being so low, three out of four people can’t aff ord to buy at today’s prices,” she says. “Plus, it typically takes two incomes to qualify [for a loan], especially since lenders are tightening their requirements for qualification. Builders are designing homes with two master suites to accommodate unrelated individuals buying together as tenants in common.”

Part of the cost of being a homeowner is taking on a major responsibility. And while investing in real estate with a partner does not lower these risks, it provides someone to share in the job—not necessarily what everyone is looking for