Buying brownstone with friends?

I have been considering the same thing so I will be interested in comments. Seems like the price per square foot - and taxes per square foot - are considerably lower for a full townhouse versus the costs of an already divided townhouse.

I have been told that remetering for gas and electric can be quite expensive. In addition, dividing up a full townhouse can prompt requirements for a number of things needing to be brought "up to code."

I don't know what sort of legal structure would be appropriate. Can you just establish a "two-family" home? Do you need to make it into a condo structure? Would such moves trigger a sharp increase in taxes? For say a four-story federal building, what would be an appropriate allocation of the costs? (I've generally wanted to have the top two floors. I've generally thought that those two floors might be worth something like 40% of the total and the parlor and garden floors would be worth 60% but I don't know.)

Sorry to have more questions than answers. Hope to see some insightful posts.

How do you intend to purchase? As joint tenants, tenants in common, as a cooperative, a two-family residence? Is each couple able to foot the financial obligations should the other couple default? Are both parties on economic parity and similar credit histories? What type of buy-out set-up do you anticipate if things don't work out? All of this may be relevant to lenders.

Generally, most in RE and the law would counsel against buying RE with friends as it is too frought with all-too-common problems that can be intractable and difficult to resolve if things sour.

kylewest: Attorneys would certainly advise against joint tenancy and even tenancy in common. Those are viable options for families who are already inextricably tied to each other's fortunes anyway; but they make very little sense for friends.

As for whether it's a good idea to purchase with friends at all - even with an appropriate corporate structure and governance - a lawyer's opinion is likely to be more a matter of experience and common sense than law. A social worker or psychologist could probably help in that area too. In some ways, sharing a building with friends is better than sharing it with strangers; in other ways, it's worse. I totally agree that there are some special risks with friends - including the friendship itself - and these issues should be fully considered and openly discussed.

Thanks - useful input for me.

Hey everyone
Thanks a bunch for your valuable comments and insight. We're just starting to consider the idea, precisely because of some of the reasons Topper mentioned above. You've given us plenty to think about. I hope to be able to return with some more informed and specific questions in the near future. Thanks again

There are a few articles in the NYTimes about this very issue -- if you do a search you'll find them - sometime between 2002 and 2007 - they might be helpful.

We've pondered this very circumstance with a few parties - exploring whether it is worthwhile, can we work out all details (as West and Kylewest pointed out)

It may be better to incorporate as a group initially to purchase the townhouse, do the renovations, and then have each family "buy back" the individual units from the corporation at the total cost to the corporation. I would encourage that the renovations be limited to what it takes to get the building to a legal two family and maybe some common area improvements but, would save individual apartment renovations for post buy back. This may be the best way to limit the issues between families and get a clean break in mortgages / finances come move in.

West81st: In instructing me as to what other attorneys would advise, you misread my post. I didn't advocate for any particular arrangement...I asked what the OP had in mind and listed possibilities.

Of the many landmines, one is touched on above. What happens if a certain improvement is deemed necessary by one party but not the other--say a new roof or reconstructed side-walk vault or new furnace. One party demands the other pony up $$$ and the other party says, "nope, it can wait a year or two." Makes for an uncomfortable building holiday party. Now let's say the roof collapses or furnace explodes or the sidewalk crumbles and someone gets hurt because agreement couldn't be reached on whether they needed fixing. Do you think the added expense to repair the problem will be happilly shouldered 50-50? Or will the party that said it should have been fixed a year ago tell the other to pick up all the added expense for having impeded the timely fixing of the fault?

What if one couple wants to move and rent out their 1/2 but the other couple hates the idea of tenants--or even other family members--occupying the house. What if, what if... The arrangement is difficult enough in a small coop set-up with strangers. Add the complication of the friendship and you have a real headache under any number of scenarios that could destroy the relationship. There is just a great deal to consider. All the ways in which it could work out fine are well and good. But to be sure it works out you have to explore as many reasonable ways that it might not work out as possible and plan for them so both parties are going in to this with eyes wide open and 'game rules' in place to avoid conflict in the future. If this would be a relatively sizeable investment for a client, I would counsel against it if asked for my advice.

kylewest: Sorry I worded that poorly. I didn't mean to put words in your mouth.

To me, the idea of two couples buying as joint tenants or tenants in common seems naive, and I think most attorneys would call attention to the attendant risks (several of which you have listed).

i've been in a tenancy-in-common (TIC) in san francisco for over seven years with 3 other parties. the building has four units. there hasn't been major problems. in SF it's very common to form these alliances in order to afford a place of one's own in that expensive market. we have a very DETAILED TIC agreement drawn up by a TIC lawyer concerning the issues kylewest has brought up and then some. i'm surprised there aren't many TIC arrangements in NYC, especially with the multi-unit brownstones. you might want to look at the SF model if you're considering on forming one.

TICs are indeed common in San Francisco, but I can't imagine a lender in New York approving such a deal at the present time, so you might want to reach out to your mortgage broker before you go forward.

ali r.
{downtown broker}

The only way a lender is approving a TIC arrangement in NYC right now is if each party can independently qualify for the loan. Even then the deal may be too far from the cookie-cutter deals that banks are comfortable with for a lender to approve it.