Co-ownership 101: A Roadmap to Better Returns
Over 50 million U.S. folks co-own a home, but most treat co-ownership as a one-off investment decision. What are they missing?
Co-owners, we have a problem.
Not only is co-ownership a big life decision, but it's also a huge investment.
Too many of us aren't thinking about it and treating it like an investment. Most co-owners aren't optimizing for return on their investment of financial capital, social capital, time, and energy. Why? For starters, the system wasn't built for co-ownership. One direct consequence is that most co-owners take a passive, backseat approach and tackle things as they come. But co-owning a home is a journey. Like an investment, co-ownership has a life cycle—let's call it the co-ownership lifecycle.
To be successful in co-ownership, it's essential to understand the complete picture. Shining a light on the process helps us ask the right questions, enables us to build systems, and empowers us to set up guardrails.
In this post, we unpack co-ownership into three parts:
We break down what each stage entails, how long it generally takes, and some of the most common challenges.
Co-buying a home (complex transaction)
Quickie
Co-buying a home is a complicated version of an already complex (home purchase) transaction.
💡 Co-buying is when two or more parties who aren't married to one another pool resources to buy a home together. Friends, family members, unmarried couples, and even married couples can co-buy and co-own property.
Timeline
6 months to several years.
The drop-off rate—from those who set out on the path to co-buy to those who actually complete a purchase—is over 60%, in our experience.
Going deeper
So you wanna buy a place with your buddy, honey, gran, or fam? There's a lot going on! Buying a home is "...the largest financial transaction consumers typically enter" (Choplin, Cognitive Research 2019). Wanna complicate things? Throw in multiple people who aren't married. Everything becomes more challenging.
In fact, going through this process is what inspired us to start CoBuy. It was super tough to manage all the moving parts, and there wasn't any real help out there. You can read more about our personal experience here.
Over several years of working with friends, family, and groups who wanted to co-buy a home, we developed a system for co-buying to make the whole process more manageable and efficient.
In the wild, many people focus on closing on a purchase to the exclusion of what comes afterward. But, like getting married—the paperwork certifying the deed is literally just the start of the journey.
Common challenges
Too many to list, and beyond the focus of this article. In short:
- Education
- Planning and building consensus
- Navigating the process
- Securing the right professional help
For years, we worked to help folks battle these issues. Recently, we turned our attention to what comes after (more on that here).
Co-ownership (like a partnership)
Quickie
Co-owning a home is a period of multi-party asset/home management.
💡 Co-ownership is when two or more parties who are not married to one another share ownership interest in a home. Co-owners may also be co-borrowers on a mortgage and/or property occupants.
Co-ownership is also commonly referred to as shared homeownership, fractional ownership, or joint homeownership.
Timeline
1 year to 30+ years.
Co-owning can be a short-term, medium-term, or long-term play. Co-owners don't have to have a firm view of the timeline, but they do need a plan for different cases.
Going deeper
Co-owning a home is like a business partnership in many ways. It starts the day you close on a purchase, or otherwise come into ownership of the property, and ends upon an exit.
As with a business partnership, the odds of "success" increase with planning, structure, and management across core aspects of the co-ownership arrangement:
- Social: interpersonal relations and interactions between co-owners
- Financial: expenses, payments, taxes, accounting
- Legal: ownership structure, documentation, compliance
- Operational: co-ordinated day-to-day management of the home
- Risk: identification, mitigation mechanisms, remedies
These core aspects of co-ownership are all related, and they all impact one another.
Common challenges
- Alignment
- Managing a Co-ownership Agreement
- Staying on top of documentation
- Managing joint finances
- Dealing with unexpected events
Exiting co-ownership (the unwind)
Quickie
Exiting co-ownership of a home involves the total or partial sale, transfer, or disposition of ownership interest in the property.
We all die. But if circumstances change before then, our ownership interest can change hands, too.
Timeline
2 months to 2+ years.
Going deeper
All good things must come to an end. Eventually, any co-ownership arrangement will be unwound through death, sale, or transfer. Our research highlights a bizarre discrepancy. We know that 100% of co-ownership arrangements will come to an end. Still, fewer than half of co-owners say they want to learn more about exit strategies. Empirically, we see that less than 5% of co-owners have a well-documented exit strategy. So this is a problem. Fortunately, there's a solution!
😁 Co-ownership 101: How to achieve a happy ending
Common challenges
- No plan
- Bad plan
Note: Things don't generally go well when you leave it to the government (see Wikipedia on probate).
Little sumthin' before you go...
In co-ownership, like life, there are so many variables we cannot control. All the more important that we take an active approach to those things within our control. There are levers we can pull!
With a clear view of the full co-ownership lifecycle, it's easier to plan, structure, and manage multi-party asset management. Ultimately, we're looking to get the "best" result. What that means varies from one case to another, but it's a function of what we put in—cash, care, time, energy—and what we get out.
Before setting out on a journey, mark the starting point and the endpoint. Then map out the intermediate points, and fill in the blanks.
Need help? Meet Shared Homeowner OS™
We've spent 31,680 hours cracking co-ownership–so you don't have to. With Shared Homeowner OS™, it’s easy to plan, structure, and manage co-ownership.
🤝 Streamline decisions
📝 Co-create agreements
✍️ Digitally sign from anywhere
🔐 Manage documentation
🚪 Plan an exit strategy
⚡️ Update anytime
One app to put you and your co-owners in control. Eliminate guesswork, avoid conflict, save $1,000s on legal fees, and cut 120 hours of admin a year.
Learn more or apply to the private beta.
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