The Co-ownership Lifecycle

When considering co-buying a home, we must look at the big picture. Too often, folks focus exclusively on the purchase. But the transaction is only the beginning.

What’s a better way to think about this journey? Let’s call it the co-ownership lifecycle, which we can break down into three stages.

1. Co-buying
2. Co-ownership
3. Exit
   

Co-buying: Multi-party Asset Purchase

We’ve established that co-buying is a complex transaction with many moving parts. From start to finish, co-buying can take anywhere from two months to several years. Co-buyers can expedite the process through research, planning, and prep work (we’ll dive deeper into the steps and how to tackle them below).

Ultimately, the goal should not be to rush to the “finish line.”

Co-ownership: Multi-party Asset Management

Co-ownership is the main event. We can’t emphasize this heavily enough.

In many ways, co-ownership is similar to a business partnership. Like a business partnership, home co-ownership involves:

• Multiple parties
• Joint investment (financial capital, social capital, time, energy)
• Shared interests (liabilities, risks, rewards)

For many co-owners, but not all, the property also serves as a primary residence. In that sense, it provides “shelter as a service,” too.

There is a critical distinction between co-ownership and “vanilla” homeownership involving a married couple or a single homeowner. Unlike married couples, property and tax laws do not protect non-spouse co-owners in the event of disagreement, death, disability, or illness.

We touched on how institutions and systems fail co-buyers. More importantly, the existing legal framework that supports homeownership fails co-owners. This fundamentally changes the game for folks who buy and own a home together.

Co-ownership can last anywhere from a year to a lifetime. Some folks, particularly younger friends, intentionally approach joint homeownership as a fixed-term play or a stepping stone. Pooling resources can be an excellent way to accelerate homeownership and build equity. For others, co-ownership is either a long-term affair or open-ended.

Exiting Co-ownership

Every instance of shared homeownership will ultimately end through full or partial sale, transfer, or death. This reality highlights the need for an exit strategy.

The legal framework around homeownership in the US provides a structure for different exit scenarios involving married couple homeowners. Still, 71% of divorcees wish they had more guidance in splitting assets (Fidelity Investments 2019).

No framework exists by default for co-owners.

Co-owners must devise and implement a plan to unwind the co-ownership arrangement in various scenarios. Many do not, and the costs can be severe, even in cases that do not involve disagreements between the parties involved.

To sum it up, failing to plan is a bad strategy.