With property prices surging and competition among buyers at a fever pitch, many would-be homeowners are struggling. If you don’t have quite enough saved to buy a home in the current climate, or if you’re worried about taking on all the responsibilities of homeownership on your own, you may want to consider collective real estate investing.

Teaming up with relatives, friends or other like-minded individuals can help you become a homeowner faster and extend your financial reach in your search.

There are a few key things to keep in mind in this kind of arrangement, so it’s essential to learn about how it works before jumping in.

Benefits of group real estate investing

“When you are pooling together and working with family or maybe individuals of like mind, you have the ability to capture the homeownership dream a lot sooner,” said Robert Kirkland, vice president of divisional community and affordable lending manager at Chase Home Lending.

Pooling your resources with other households means you’ll have more for a downpayment and may be able to increase your budget, or look at larger properties.

Nikki Merkerson founded Pairgap, an app that helps interested buyers partner up and form an LLC to purchase real estate collectively. She said it’s essentially like Tinder for real estate. These arrangements often favor larger, multi-unit dwellings so every partner can have their own space.

“Most of our families and our partnerships are looking for multifamilies,” she said.

Christian Pierre, 40, a Pairgap user, agreed that collective real estate investing has significantly changed his search criteria.

“Let’s just say million-dollar properties are now on my radar. It honestly opens up a much bigger market,” he said. “On my own, I was looking at condos in the $300,000 range. Houses at the max would have been $500,000.”

Collective real estate investing also spreads the risk around a little, so one single person or household won’t be on the hook for expensive repairs or other issues with the property. Pierre said that also reinforced how buying real estate is really a long-term investment.

“When I started thinking about, ok, 20 years out, what is the potential of the home?” he said. “I wanted it to be an investment. I wanted to continue the process. That’s what I’m looking at in potential partnerships.”

What you need to know about group investing

Before you dive headfirst into a collective real estate purchase, make sure you understand the intricacies of how these arrangements work.

“Co-ownership is no different than if you co-sign on a car,” Kirkland said. “As you make payments, you’re positively improving your credit score. If you have late payments, you’re both taking hits.”

Entering into a real estate purchase with other people means your credit profiles will be somewhat linked. If one partner misses their share of the payment, or causes payments to be late, everyone’s credit will be negatively affected. Similarly, banks will evaluate every purchaser’s credit before the sale, so if one partner has a much lower score it could affect your purchasing power.

“We’re looking at both individuals’ financial profiles, we’re looking at the credit of both individuals,” Kirkland said.

Keep in mind that there are risks to buying real estate, even if you’re doing it collectively.

For example, if one of the owners loses their job and can no longer afford their share of the mortgage, the whole group will still be responsible for their share of the cost. In cases like that, it will be important to work with your lender on repayment options if the other owners can’t cover the shortfall.

Because of the joint ownership, everyone also needs to agree before the property or a share of the ownership can be sold.

“It is essential to review the real estate laws for one’s state but traditionally, when there is equal ownership, you will need to consent to refinance or sell the property,” Kirkland said.

Similarly, all owners are equally responsible for maintenance and upkeep of the building, but as with most multi-unit dwellings, residents can usually make repairs and updates to their own unit.

Kirkland said most real estate attorneys would be able to help guide you through drawing up the ownership documents, and those will dictate how the property is divided up among owners, including how profits will be shared if and when you decide to sell.

How group real estate purchases differ from single-household ones

Technically, the process is pretty similar no matter what kind of real estate you’re buying, or who you’re buying with. But it’s even more important to know what you’re getting into and make sure you and your partners are on the same page.

Merkerson said that Pairgap focuses on educating its users so they understand the risks and benefits of group real estate investing.

“We do everything from pre-purchase education to neighborhood analytics,” she said. Pierre noted that feature actually changed which neighborhoods he was focusing on in his own search.

Originally, he wanted to move to the Brooklyn neighborhood of Bedford-Stuyvesant, but after learning about investments in other parts of New York City, he shifted.

“I wound up going to Jamaica, Queens, with a real estate broker and looked at some properties,” Pierre said. “You have to get into the mindset of what is the potential for a neighborhood, not just what it looks like currently.”

Merkerson added that group real estate investing is especially attractive for millennials, who can use it as a tool to start building their wealth sooner.

“Our platform is specifically to address the millennial homebuying problem,” she said. “It’s important for people to learn how to do it the right way so they can utilize homeownership as a means to financial freedom or financial independence.”

It’s an especially good option for roommates who get along, Merkerson added.

“We’re targeting people who are already roommates now and who are renting,” she said. “When you’re paying rent, you’re paying your landlord’s mortgage.”

How to get ready to buy real estate

Whether you’re buying property by yourself or in a group, the fundamentals are still just that: fundamental.

“I’ve gotten preapproval and I’ve looked at my own credit and I know I’m in a good position to go for it myself,” Pierre said, demonstrating the right path to homeownership for any buyer.

Getting your financial house in order by making sure you have strong credit is a crucial step, because your credit score affects your mortgage interest rate, which in turn affects how much it actually costs you to buy the property you want.

A mortgage preapproval is also an important step, especially in this competitive market, because it shows sellers that banks are actually willing to lend you the money you’re offering, and helps speed the process along by marking you as a serious potential buyer.

Check out Bankrate’s guide for more tips on how to prepare for homebuying.

Bottom line

For most people, real estate is the most expensive purchase they’ll ever make. It’s also a key way for many individuals and families to build wealth and is an essential part of the American Dream. For some, buying a home on their own can be prohibitively expensive, but it may become affordable if they’re willing to pool resources with other potential buyers and cast a wider net.

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