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Going Dutch on a brownstone? Minimize your risk if you're buying with friends

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It sounds, at first, as practical as it is idyllic: rather than resign yourself to renting for the rest of your life, simply buy a brownstone with friends. Split the chores and the mortgage, get more bang for your buck, and create a community at the same time.

The idea isn't new: it dates back to the 1960s, when upwardly mobile couples or groups moved into Upper West Side brownstones, a la Mad Men's Peggy Olsen, and continued with the so-called "revival" of Park Slope in the 1980s.

"The original 'brownstoner' movement was composed of many couples or small groups of buyers that took on the ownership of town homes," says Donald Brennan, the principal of Brooklyn-based brokerage Brennan Realty Services.

These days, crippling home prices might be more of an incentive for a home share than any utopian ideals, but whatever the motivation, the approach has been gaining steam lately, with profiles in both The Atlantic and New York Magazine of families or groups of friends who've split up New York homes together.

While, of course, you could go in on an apartment, brownstones hold a particular appeal for sharing, as they're already roughly divided up by floors. (Compare that to the delicate task of divvying up space for two families in a regular condo.)  

"I've had a family split up a four-story building into two duplexes—with an understanding that they'll share the yard—and I've had two couples split a similar building into two parts, as well," says Halstead Property broker Peggy Aguayo. "I also have a group right now looking for a three-story building—it's a couple who wants two floors, and their single friend who just wants the top floor." 

Still, when this kind of arrangement goes wrong, it goes really wrong, especially in a historic brownstone that comes with its own concerns—​namely shared outdoor space, and the upkeep generally required of a 100-year-old building. So before you take the plunge, keep in mind these tips: 

Brace yourself for a long search. New York's market is notoriously flooded with all-cash buyers right now, Aguayo says, and "anybody who's buying usually wins a bid because they can pay up front, with cash." That's even more true when it comes to multi-family homes, which have the highest percentage of all-cash buyers of any type of housing in the city, says mortgage banker Peter Lucia, the Brooklyn branch manager for Mortgage Master.  "I've had pre-approved buyers trying to buy houses for a couple of months or more," he says. If you don't need a mortgage, you're already a step ahead. But if you do, prepare to put in an offer (or a few) that aren't successful before you land a deal.

Assess your friends. Uncomfortable though it may be, it's best to run a full credit report on the people you're thinking of buying with, and to let them do the same for you. "Vet them as if you were loaning them money," says Neil Garfinkel, the in-house counsel for the Real Estate Board of New York​ trade group, adding, "If one party has a lot of cash in the bank and the other doesn't, for instance, that's a big concern."

Plan for the long haul. "Commitment to a neighborhood has to be really strong," says Brennan. At a minimum, you want to be sure you're interested in staying put for the next two to three years, he says, given the size of the financial commitment and the time frame of even minor renovations you might have in mind. (Also, we can't imagine your co-buyers would be too thrilled if you bail on the whole arrangement a year into it.)

If you're moving into an area of Brooklyn you're not too familiar with for the sake of a cheap(ish) building, do as much research as possible before setting up a deal. Visit the area and get a sense for the neighborhood if you're serious about putting down roots. This is particularly true for buyers with young children, and you'll want to think about elementary school options before you sign off. An arrangement that seems fine now might not be when you're on the hunt for schools, and you don't want to have to extricate yourself from the shared home because you didn't plan ahead of time. 

Get separate attorneys. "Like any other business agreement, you want your own representation and to make sure that your rights and interests are protected in writing," says Aguayo.

Be your own co-op board. Before making any purchase, set out the rules for guests, splitting up the tax and mortgage bills, dividing chores and upkeep, and what will happen if one party decides to sell early. If you're the one left in the building, you'll want to have stipulated ahead of time that you have veto power over potential new residents replacing your friends, just as you would in a traditional co-op.

Skip the LLC. If you're sharing a mortgage, don't opt for an LLC. Lenders are more friendly to groups than to LLCs, says Lucia. Also, if you go your separate ways, it's easier to re-finance and get new names on the deed if you've got a traditional mortgage in place. As long as you all send in your paperwork and are approved, the process won't be any more complicated by virtue of it being a group endeavor.

Divvy up outdoor space ahead of time. Often, one of the perks of a brownstone is the accompanying backyard, rooftop, front yard, and even the stoop. As part of the agreement you reach with your co-buyers, you'll need to consider exactly how you'll split up access to this communal space, as well as any other common areas.

Consider historic details. Brownstones are usually on the older side, so you'll want to figure out how everyone feels about preserving (or entirely redoing) historical details, as well as what'll happen when you run up against the costly repairs that inevitably happen in an old building. "For instance, you could say that you agree to split all fees up to $5,000, but any repairs that cost more than that have to be jointly agreed upon," says Garfinkel. "It's a combination of economics and the realities of owning a property together."

Get it in writing. This should go without saying, but everything you hammer out ahead of time must, must be in writing and signed by both parties. "That would be the first document produced in court" if things get contentious, says Garfinkel.

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