Is buying a home with a friend a good idea?

Is buying a home with a friend a good idea? »Play Video
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PORTLAND, Ore. - What do you do if you want to buy a house but can't afford it?  Ever thought about buying a home with a friend?

More and more, friends are teaming up to do just that.  Time Magazine recently dubbed the term 'Co-Ho,' for communal homeowners. 

While it can save you money and help build equity, there are some pitfalls.  But a couple of friends who partnered up to purchase a home together say if you do it right, it can work.

Good friends Jaime Arb-Haessig and Sarah Marzolf share a duplex in northeast Portland and by 'sharing,' we mean the loan, the taxes, the maintenance and the utility bills.  Both are in their early 30s and figured they would pool their money to give them greater buying power.

"I work at a non-profit, so I would not be able to afford to buy a house by myself," said Marzolf.

"When I was looking to buy a home, I realized I couldn't buy into a neighborhood I wanted to live in," said Arb-Haessig.

But owning a home together meant having their finances and assets tied together and the bank doesn't care who is late with the check.  If one person defaults on the loan, both their credit ratings could take a hit.  The thought of that didn't sit well with their families at first.

"Hell no was my parents' reaction," said Marzolf.  "They're like 'that's not a good idea, you don't know what's going to happen.' "

But the contract was very specific and included everything from how long they plan to keep the property, how it will be sold, how to handle repairs, what happens if one moves out, what happens when one of them dies and even naming a third-party mediator in case something turns ugly.

The two don't anticipate anything going wrong and said their living arrangement has actually helped their friendship.

"We've stayed closer than we would have otherwise," said Arb-Haessig.  "And we're more up on what's going on in each other's lives."

They also have other contingencies in place.  They opened a joint rainy day account for emergency repairs or if someone is a little late on a payment one month.  Arb-Haessig also recommends consulting a real estate attorney.