“Friend Compounds”: The Pros and Cons of Buying Real Estate With Your Besties

Buying your first house has never been easy, but for today’s younger generations, it’s increasingly out of reach. High interest rates, soaring home prices, and the heavy burden of student loan debt have made it difficult for young folks to purchase a home on their own.

Even cutting out lattes or avocado toast doesn’t do much to bridge the gap. And forget about hanging out with friends and taking memorable trips together if you’re trying to buy a house. Saving up to buy a home can feel like you’re forgoing the fun of life itself, while not making much progress toward homeownership anyway.

But what if there were a way to combine the two? What if you could own property and spend quality time with your friends enjoying some food and drink in the comfort of your own home?

Well, if that sounds great to you, perhaps you should consider pooling your resources and buying a “friend compound” together.

According to a recent article in The San Francisco Standard, buying friend compounds has become increasingly appealing, and data shows that 14% of millennials have purchased property with friends, and a whopping 70% of Gen Z say they’re open to the idea.

Here are a few things that make co-buying appealing:

Affordability – The cost of entry into the housing market is a major driver of this trend. A recent survey found that 44% of co-buyers cited affordability as their primary motivation. Pooling resources means you’re not solely responsible for the down payment, mortgage, taxes, or maintenance. Imagine splitting the cost of a $600,000 home among four friends instead of shouldering it alone. Not only does this make the financial leap less daunting, but it also allows co-buyers to purchase homes in areas that might otherwise be unaffordable.
Social Connection – But it’s not all about dollars and cents. In an increasingly isolated world, the idea of living closer to your friends is incredibly appealing. Nearly 20% of co-buyers prioritize proximity to friends, and many dream of creating a community where dinners, bonfires, and shared experiences are just steps away. The U.S. Surgeon General recently warned about the mental health impacts of loneliness, highlighting the importance of social bonds. For many, friend compounds offer more than housing—they’re a lifestyle.
Creative Housing Options – Friend compounds can take many forms. Some groups opt for large single-family homes with converted spaces, while others buy adjoining properties or develop land together. The flexibility allows groups to find or create spaces that suit their collective vision.

While this all might sound exciting and prompt you to start planning to buy your own friend compound with a bunch of friends over beers in front of a fire pit, it’s important to stay grounded and be practical if you really want to make it happen.

So let’s look at some pros, cons, and tips you should consider before putting your plan in motion…

The Pros of Buying with Friends

Co-buying with friends can be a path to financial stability and a richer social life. Here’s why it works for many:

Affordability: Splitting costs allows buyers to access better mortgage terms and reduces individual financial strain.
Shared Vision: You get to handpick your neighbors and build a community that reflects shared values and priorities.
Built-In Support: Living with close friends provides a natural support system, whether it’s help with childcare, errands, or simply companionship.

The Cons of Buying with Friends

While the concept is appealing, it’s not without its challenges. Co-buying comes with its own set of risks and complications.

Lifestyle Conflicts: Living with friends sounds idyllic, but differing lifestyles can create friction. Maybe one person is a night owl while another values early morning quiet, or one friend is more lax about shared expenses.
Financial Complexity: Establishing ownership shares, dividing costs, and managing joint finances require meticulous planning. Without a solid agreement, disagreements can arise.
Uncertain Futures: Life happens. Friends may move away for jobs, get married, or face other life changes, potentially leaving the group scrambling to fill their spot or buy them out.
Limited Inventory: Finding the right property—one that meets everyone’s needs and fits within budget—can be time-consuming and frustrating. There’s not always a lot of houses that will have the size needed, or a group of homes right next to each other to purchase and turn into a “compound.” Also keep in mind that it can be difficult for two people to agree on the perfect home, so when you add in several more to the decision-making process, it can be even more so.

Tips for Making Friend Compounds Work

To turn the dream of communal living into reality, it’s crucial to approach the process with a mix of practicality and foresight.

Map Out Priorities – Before you start house hunting, make a list of must-haves and deal-breakers as a group. Consider location, amenities, school districts, and proximity to nature or urban centers. Everyone should feel heard and represented in the decision-making process.
Draft a Legal Agreement – Put everything in writing—financial contributions, ownership shares, rules for shared spaces, and plans for resolving disputes. This agreement is the foundation for long-term harmony and protects everyone’s interests. It’s kind of like starting your very own homeowner association, but you all get say in the rules and regs from the get-go.
Plan for the Future – Life changes are inevitable. Discuss scenarios like marriage, children, relocations, or career changes, and agree on how these will be handled. If someone moves out, will their space be able to be sold to someone else? If so, how will new owners be vetted? How will shares be sold or transferred?
Work with Professionals – Enlist the help of experts to navigate the complexities of co-buying. A real estate agent can identify suitable properties, while a lawyer can draft agreements and ensure compliance with local laws.
Be Patient – The right property might not appear overnight. Be prepared for a longer search and keep communication open throughout the process.

The Takeaway:

“Friend compounds” are a creative way for anyone struggling to afford homeownership on their own to buy a home by pooling resources. But not only does it curb costs, it also provides the opportunity to handpick your neighbors, and create a lifestyle filled with supportive friends right next door.

But success requires thoughtful planning, open communication, and the right professional support. However, with the right mix of friends, foresight, and guidance, you can turn the dream of owning a home into a reality. Whether it’s shared morning coffees or a backyard barbecue, the memories you create could make the effort more than worth it.