Talk me out of going 50/50 on a million dollar house in the Bay Area

[mitchm]

Me: 33 year old lifetime renter in HCOL area (Oakland). Love the Bay Area/Oakland (despite its many imperfections) as well as my specific neighborhood and staying here permanently is a top priority, regardless of job. I work in a nonprofit and love my job, but if I were to become unemployed I would also plan to stay here and find other work. I can't imagine leaving -- whether for a better job opportunity, a chance to buy "more" house, save more money in a lower cost of living area, etc, or access better schools (I don't want kids). I have a core group of friends here and would like to stay and build my life with them (we are all on the same page). That is far and away the most important thing to me and I don't imagine it changing anytime soon.   

I haven't been actively searching, but the house a few doors down from me is for sale: 3 bedroom/3 bathroom, 2 kitchens (!), garage that could be converted to a bedroom, and backyard that could likely accommodate a tiny house on wheels/accessory dwelling. We would move into the house together with our SOs (who would pay rent) and likely rent the third room as well.

I am NOT thinking about this as a good "investment" idea or planning to generate income from this. It is more about the chance to secure a stable and happy place to live/lifestyle with my "intentional" family and to secure a place to live in an area ravaged by a massive housing shortage. Nevertheless, we would expect to have at least 3 people (beyond the two owners) paying rent. 

I have about 100k in cash, and $100k in index funds. Income is about $51k and should be increasing to about $63k imminently. I am extremely fortunate in that my father would be willing to lend me several hundred thousand dollars at below current market rates that he has sitting in cash if I needed it. My best friend of 10+ years has a similar situation and we would likely make an offer on the house together and if accepted, purchase via a "tenancy in common." We could either make a cash offer or, more likely, make a 50%+ cash down payment and finance the rest through a mortgage.

Am I crazy? The property taxes alone would be $10k+ year. But I'm sick of moving and the constant threat of the house I'm renting being sold. I am currently the master tenant in a 3 bedroom paying $935/month. I would prefer to pay 1400 and share the unit with only one roommate, but that hasn't panned out. Based on info i have from the landlord, I can reasonably expect this house to be sold and to be booted within the next 1-3 years.

[Dancin'Dog]

Short answer: I wouldn't want to own 1/2 of a house. 

[rothwem]

You are absolutely nuts. No way in hell. Only way I would co-own something is if neither of us were living in it and it was just an investment.

[Dicey]

You are absolutely nuts. No way in hell. Only way I would co-own something is if neither of us were living in it and it was just an investment.

No way in hell would I want to be caught responding so vehemently to a post I obviously hadn't read.

[BikeFanatic]

I have seen this work but usually it is family, like two siblings.  I do know of one successful friends who bought a
Two family . CAN you  make it into two condos? That might work. We had a bunch of people do this where i work due to crazy home prices in 2005, one group still live together in harmony, one group is bitter enemies but converted to two condos(and are making a killing when they sell). I think you will have a lot to consider and I would not do it unless you have 2 separate apartments to do as you wish. 10 k in taxes is ridiculous FYI.

[former player]

I only managed to buy a property in London by buying jointly with my brother: we lived there together for 9 years until I moved out: he still has the house.  Long term it worked out well financially for both of us and we are still in easy contact with each other, no different from how it has always been.

You obviously know your friend of 10 years very well, and given that you are intending to spend a lifetime in this location buying is better than renting both for security/stability reasons and very probably for long-term financial reasons: in 30 years' time I think you will be glad to own not rent.

The more you can physically separate the two households the better, I think, and having the second kitchen will be absolutely key in this.

The one thing I would be clear on is the terms on which a sale takes place if the arrangement breaks down for any reason.  The hardest point of a joint ownership arrangement is it breaking up, for whatever reasons, and being clear on the right to sell even if only one of you wants to sell, perhaps with rights for the other to buy at market value, will be key.  Plus mutual life insurance in case one of you dies.

Good luck.

[rothwem]

You are absolutely nuts. No way in hell. Only way I would co-own something is if neither of us were living in it and it was just an investment.

No way in hell would I want to be caught responding so vehemently to a post I obviously hadn't read.

What am I missing?

-OP has friends that are super close buddies
-OP wants to split downpayment expenses and mortgage with this buddies and their SOs
-House costs a million dollars
-They also plan on renting additional rooms

--what I'm inferring--

-OP has no idea what they're going to do when major maintenance is required.
-OP has no idea what they're going to do when their buddies or them want to have kids and move out.
-OP honestly doesn't make enough money to realistically own even half of a million dollar house, even with family EOC.

Also some further questions--what happens if your friend loses their job?  What happens if you lose your job?  Will you cover their half? What happens if the tenants you get are deadbeats?  Is the OP going to evict them and take the rent hit? 

[mozar]

I know some people who did this in DC. They were a bunch of people in your situation.  They had a good agreement, imo, where any of them could move out and either get all their money back or receive a share in rental profits. I don't remember the specifics but there was a lot of turn over without acrimony. I think you will have to go in with a business mindset with a written agreement that covers a lot of contingencies. 
I think you should retain a lawyer as well. Also consider buying the house with just you and your father.

[mistymoney]

You are absolutely nuts. No way in hell. Only way I would co-own something is if neither of us were living in it and it was just an investment.

No way in hell would I want to be caught responding so vehemently to a post I obviously hadn't read.

What am I missing?

-OP has friends that are super close buddies
-OP wants to split downpayment expenses and mortgage with this buddies and their SOs
-House costs a million dollars
-They also plan on renting additional rooms

--what I'm inferring--

-OP has no idea what they're going to do when major maintenance is required.
-OP has no idea what they're going to do when their buddies or them want to have kids and move out.
-OP honestly doesn't make enough money to realistically own even half of a million dollar house, even with family EOC.

Also some further questions--what happens if your friend loses their job?  What happens if you lose your job?  Will you cover their half? What happens if the tenants you get are deadbeats?  Is the OP going to evict them and take the rent hit?

I'm not sure why you assume OP has "no idea" just because it wasn't in the OP. That is when you ask questions, rather than assume.

OP doesn't have the income for half million dollar house - that I agree on. But if the SO is paying rent, and a 3rd bedroom is rented out - that definitely changes the equation.

One important thing for OP and coowner to do - if they pursue purchase after research, legalese info, etc. is to have 6 months of house expenses in a joint account that is used only for the house - in case of unexpected unemployment, or a new roof, or something like that.

I would advise the OP to try to swing it without money from a parent. That could be a backup to the backup in case of trouble.

[NonprofitER]

Like others have mentioned, I think putting all possible contingencies in writing in advance is the key to making this work. Things like:
~what happens when one household can no longer afford their portion,
~what happens with a third bedroom renter is unavailable/trashes the place/ starts a meth lab/ wants to move a partner in,
~what happens when someone's life changes unexpectedly and they need to pull out of the arrangement, financially and otherwise,
~what happens if the friend and his partner decide to have kids (even if you don't want your own),
~limits on house guests, boundaries, etc.
~how you evaluate, agree on, and split costs of things like new roof, plumbing repairs, HVAC, etc. Do you both set aside a portion each month for deferred maintenance/ capital expenditures, etc.
~what happens when/if you and the co-owner become legally married to partners,
~life insurance expectations
~right of inheritance expectations
~what happens if/when values unexpectedly decrease, due to natural disaster or other acts of god
~how you would evaluate the equity/property value in a mutually-agreed upon manner
Etc.
Etc.

People are not wrong to point out holes, but its not impossible. You just have to go in assuming every potential scenario and have a pre-agreed plan of action to reduce (not eliminate) problems. A lawyer is absolutely a must, if you proceed.

I too, as both a homeowner and landlord with multiple properties, would never opt to own property that I lived in personally with someone other than a legal spouse. I would invest in partnerships only with clear, financial goals and an airtight partnership agreement - and even then, I've preferred the path of owning 100% of all property, rather than more total properties at a smaller percentage. Your mileage may very.

10 - 30 years is a long time for people's goals, priorities, personalities and whatnot to change. I too have a version of decades-long 'intentional family', but I would fear living together breeds opportunity to disrupt the dynamics. I would argue your best bet to keep relationships happy and healthy is to not mix financials (read: home ownership).

[mozar]

Also pets. I do remember one point of contention.  One owner got a cat. And everyone who was allergic had to move out.

[Sibley]

Have you lived with this friend in the past? What about the SOs? Just because you're friends with someone doesn't make you compatible living partners.

Personally, I wouldn't do this. It's too complicated for my taste, and there's too many potential pitfalls. If you choose to go ahead, you need to have some serious conversations with all potential parties here, and get things in writing.

[ixtap]

The proposal here is to go 25/25/25: there are at least four investors, not just two.

Unlike many of the posters, I don't have an issue with communal living. Especially given that it sounds like you have already been doing so.

However, it doesn't sound like your partner is currently sharing with you and your roommates. Are they onboard with communal living?

Also, you are currently in a 3 bedroom with two other people and wish you could have one less roommate. So your solution is to have more roommates by adding partners, as well as filling all the rooms?

You have a lot of soul searching to do before making this leap.

[mitchm]

Thanks all for the insights and advice. Definitely a huge number of factors to take into consideration, and yes, despite my enduring and long-term friendship with this person (and yes, we have lived together successfully in the past), there would absolutely be a formal agreement drafted with assistance from a lawyer to address things like shared maintenance costs, emergency mortgage payment fund, pets, etc. as well as every conceivable eventuality that could arise i.e. natural disasters, what happens when someone wants to be bought out, dies, loses their job, etc.

It is more about a mutually beneficial, secure living arrangement. As for the co-owner having kids down the road, that is expected and actually more a feature than a bug. On the other hand, it is possible that working out the details is just too complicated and it would make more sense for one of us to purchase the house outright and just rent to the other. If neither of us is willing to purchase on our own (or can't manage it financially) perhaps it just isn't meant to be.

I am going to visit the place tomorrow for the hell of it, but given that the house will likely sell in short order for more than the asking price, this is probably mostly a pipe dream anyways. Still, it is something that I have been daydreaming about for a while so it has been helpful to get some grounded/realistic feedback. Thanks all!

[mitchm]

The proposal here is to go 25/25/25: there are at least four investors, not just two.

Unlike many of the posters, I don't have an issue with communal living. Especially given that it sounds like you have already been doing so.

However, it doesn't sound like your partner is currently sharing with you and your roommates. Are they onboard with communal living?

Also, you are currently in a 3 bedroom with two other people and wish you could have one less roommate. So your solution is to have more roommates by adding partners, as well as filling all the rooms?

You have a lot of soul searching to do before making this leap.

Good points; the potential co-owner is equally enthusiastic about communal living or this would all be moot. This is something we have been discussing on and off for at least a year, just hadn't taken any concrete steps because we assumed it was not really feasible. Most houses we see on Zillow/in the neighborhood in this price range are more like 3 bedroom and 1 bathroom (and of course only 1 kitchen), which we both agree is totally NOT workable for any kind of communal living. This house caught our eye just because it seems almost ridiculously well suited to our aims.

I'm also realizing that my statement about current living situation was a little confusing/misleading. I am the master tenant in a small 3 bedroom with 2 craigslist roommates; the place itself is fine, but I dread the fairly regular roommate searches required when someone moves out and then the process of having to get used to living with an entirely new person. That's why if I had the chance I'd "convert" it to a 2-bedroom even though it would mean a substantial increase in rent for me ($935 to $1400). Furthermore, the place is not suitable for the kind of communal living we are envisioning as it is much too small/close quarters to accommodate couples. And lastly, as mentioned before, this housing arrangement will be for the medium-term at best as I think the house will be sold soon-ish.

Edit: Lastly, forgot to point out: renting all of the rooms wouldn't be necessary to making the scenario financially viable. More likely, there would initially be 4 of us and we would rent the additional room if there was a suitable candidate(s) but not for the extra income alone. More realistically, we would first explore converting the garage to a room and/or putting a tiny home in back before moving beyond 4 person occupancy, so that we'd have a little bit more "breathing room."

[affordablehousing]

Ha, my first reaction was how in the heck do you find such a screaming cheap deal??? If you find a 3bd/3ba for around a million in Oakland you pounce on that sucker like the hidden pearl it is with however many friends you need to get to a closing. I passed on what you're doing in Brooklyn for all the same reasons commenters mentioned above, and I have always regretted it. Not only would I be retired by now (the house appreciated about $1.5MM in 5 years, we had timed it perfectly), it would have been a really fun place to live for a bunch of years while we fixed it up.

The place sounds perfect for a TIC. Eventually you can try for a condo conversion. I would put as little down as possible and save your and your dad's cash for the condo conversion, which makes an exit much easier, but that sounds like a great deal.

The worst that happens is an ugly breakup, which national statistics state is a common thing for the American marriage, and MMM states is an easy-peasy thing to do. The reward could be sweet f it works out.

[Dicey]

You are absolutely nuts. No way in hell. Only way I would co-own something is if neither of us were living in it and it was just an investment.

No way in hell would I want to be caught responding so vehemently to a post I obviously hadn't read.

What am I missing?

-OP has friends that are super close buddies
-OP wants to split downpayment expenses and mortgage with this buddies and their SOs
-House costs a million dollars
-They also plan on renting additional rooms

--what I'm inferring--

-OP has no idea what they're going to do when major maintenance is required.
-OP has no idea what they're going to do when their buddies or them want to have kids and move out.
-OP honestly doesn't make enough money to realistically own even half of a million dollar house, even with family EOC.

Also some further questions--what happens if your friend loses their job?  What happens if you lose your job?  Will you cover their half? What happens if the tenants you get are deadbeats?  Is the OP going to evict them and take the rent hit?

@rothwen, I owe you an apology. I read in bed before the crack of dawn, with only my dominant eye, on a small tablet. I misread "Only way..." as "No way..." Now that I am sitting upright at a big screen, I see the mistake was all mine and I fully apologize. However, some good may have come from my mistake, because your reply post is outstanding. You've added a lot of important questions and provided OP with plenty of food for thought. I have some more thoughts for the OP, but I want this sincere apology to stand alone.

[Dancin'Dog]

The thread title says "Talk me out of...."
Why are so many people trying to tell him how to make it work? 


IMO, he should buy the house himself & charge everyone else rent.  That avoids most of the complications & builds his nest egg.  (That is why we are on this forum, right?) 

[Dicey]

10 k in taxes is ridiculous FYI.

Just for fun, last week I looked up my grandma's old house in Elmhurst, Illinois. The most recent buyer paid $110,000 for it in 1989. The property is now valued at about $375k. There have been no additions or major changes. The current owner's 2018 taxes were $8,015. I just added up all the taxes IL levied on this property since 2000 (because that's all that I see on Zillow). It's $110,084! For only 18 years!

You wouldn't bat an eye if OP wanted to buy a house that was priced at $375k.

In fact, the OP's taxes in Oakland would be higher than $10k. They will be closer to $12.5k. Absent major permitted changes, the tax increases will be capped at approximately 2% per year.  A house purchased in my neck of the woods (not too far from where OP is) for $110k in 1989 would be worth at least seven times that amount now, even with zero improvements, and the property taxes would have less than doubled in the ensuing 40 years.

Everything is relative, @BikeFantastic.

[rothwem]

IMO, he should buy the house himself & charge everyone else rent.  That avoids most of the complications & builds his nest egg.  (That is why we are on this forum, right?)

Yeah, that’s probably the least bad way to handle this situation. I’ve rented to friends before though and I’ve got a 50/50 success record. The first friend was awesome, the second friend...we’ll we’re no longer friends since he thought it was okay not to pay rent. And “borrow” quarters from my change jar. And borrow my dress shoes and suit jacket. And smoke in said suit jacket.  Maybe I’m projecting though...

After the deadbeat, I did rent the room to a random, and we actually became friends after that. So maybe 66% success rate?

You are absolutely nuts. No way in hell. Only way I would co-own something is if neither of us were living in it and it was just an investment.

No way in hell would I want to be caught responding so vehemently to a post I obviously hadn't read.

What am I missing?

-OP has friends that are super close buddies
-OP wants to split downpayment expenses and mortgage with this buddies and their SOs
-House costs a million dollars
-They also plan on renting additional rooms

--what I'm inferring--

-OP has no idea what they're going to do when major maintenance is required.
-OP has no idea what they're going to do when their buddies or them want to have kids and move out.
-OP honestly doesn't make enough money to realistically own even half of a million dollar house, even with family EOC.

Also some further questions--what happens if your friend loses their job?  What happens if you lose your job?  Will you cover their half? What happens if the tenants you get are deadbeats?  Is the OP going to evict them and take the rent hit?

@rothwen, I owe you an apology. I read in bed before the crack of dawn, with only my dominant eye, on a small tablet. I misread "Only way..." as "No way..." Now that I am sitting upright at a big screen, I see the mistake was all mine and I fully apologize. However, some good may have come from my mistake, because your reply post is outstanding. You've added a lot of important questions and provided OP with plenty of food for thought. I have some more thoughts for the OP, but I want this sincere apology to stand alone.

No worries. I’ve done the same thing...I reread the post about 50 times after seeing your reply!

[AccidentialMustache]

Along with writing out plans for things, figure your plan out when house prices collapse because all the tech companies go remote-okay and suddenly there's an exodus and housing oversupply in the bay area. No as-yet-to-be act of god needed, its already happened (covid and lockdowns).

[erutio]

... all the tech companies go remote-okay and suddenly there's an exodus and housing oversupply in the bay area...

Even when the former happens, the latter will not happen.  We are a long way from a housing oversupply in the bay area.  There's been housing shortage since before the tech companies were there.

[Imma]

Short answer: I wouldn't want to own 1/2 of a house.

Why not? Most people own 1/2 of a house, unless they are single. I own 1/2 of a house. I own with my partner but there are friends I know twice as long.

I think the house is expensive for your income, but if your families are willing to help out it may be within your budget. I've lived with friends and with a partner and also with both at the same time. We're in a similar situation - childless, close to the people we chose as our family, interested in communal living. Yes, there's a risk, but life's about taking a risk. Buying with a partner or marriage are also risks and you think them through and then you jump in (or not) and hope for the best.

[GoCubsGo]

@ Dicey is right, taxes are so situation dependent.  I live super close to Elmhurst, Il and $8k in taxes is totally par for the course.  I sold a house (as a Realtor) that the property taxes were $68,000 per YEAR (he fought them and got it down to $50K)   My own taxes are way more than the OP's potential house and I'm not even by an ocean.   Illinois is the worst.

[researcher1]

I have about 100k in cash, and $100k in index funds.
Income is about $51k.

I think you know this is a spectacularly HORRIBLE idea.

First off, you want to buy a $1M house with a $51K income.  THIS IS F*CKING INSANITY!
I wouldn't even be comfortable paying the property taxes, insurance, maintenance, and utilities on that income.

Secondly, I wouldn't count on zoning laws allowing you to convert a garage into a bedroom or sticking mobile home in the backyard.

Third, it is a horrible plan to purchase this with a buddy.  It just isn't worth it, given the huge number of variables.  What happens if him/his girlfriend lose their job and can't pay their share?  If they split up?  Or have a family and want to move out?  Don't want to make necessary repairs?

[Dancin'Dog]

If I lived in the Bay area I'd look into buying a boat & living on the water. 

[Dicey]

Secondly, I wouldn't count on zoning laws allowing you to convert a garage into a bedroom or sticking mobile home in the backyard.

You clearly wouldn't, but OP can count on it. New laws were enacted in January of this year to make it easier to add Auxiliary Dwelling Units (ADUs), basically anywhere they can be squeezed in, and local municipalities can't do anything about it. Permitting costs were lowered, too. That part of the plan is 100% feasible.

[researcher1]

Secondly, I wouldn't count on zoning laws allowing you to convert a garage into a bedroom or sticking mobile home in the backyard.

You clearly wouldn't, but OP can count on it. New laws were enacted in January of this year to make it easier to add Auxiliary Dwelling Units (ADUs), basically anywhere they can be squeezed in, and local municipalities can't do anything about it. Permitting costs were lowered, too. That part of the plan is 100% feasible.

So there are absolutely NO building codes associated with these new ADU's?
There are NO property setback laws for detached units?

A 5 second Google search shows that you are wrong.
It looks like there is a 4ft setback requirement for new detached units, so they can't just be "squeezed in anywhere".
 And you would need to get water/electric/sewer to the building, which involves extensive permitting.
I also see a 104 page document of Oakland amendments to the California building code.  In it, I'm guessing it says you can't just throw a mattress in the garage and consider it a bedroom.  There are surely requirements that need to be met (egress, windows, closets, proper electrical outlets, ect).

[Dicey]

Secondly, I wouldn't count on zoning laws allowing you to convert a garage into a bedroom or sticking mobile home in the backyard.

You clearly wouldn't, but OP can count on it. New laws were enacted in January of this year to make it easier to add Auxiliary Dwelling Units (ADUs), basically anywhere they can be squeezed in, and local municipalities can't do anything about it. Permitting costs were lowered, too. That part of the plan is 100% feasible.

So there are absolutely NO building codes associated with these new ADU's?
There are NO property setback laws for detached units?

A 5 second Google search shows that you are wrong.
It looks like there is a 4ft setback requirement for new detached units, so they can't just be "squeezed in anywhere".
 And you would need to get water/electric/sewer to the building, which involves extensive permitting.
I also see a 104 page document of Oakland amendments to the California building code.  In it, I'm guessing it says you can't just throw a mattress in the garage and consider it a bedroom.  There are surely requirements that need to be met (egress, windows, closets, proper electrical outlets, ect).

I didn't say there weren't building codes, just that our Governor has made easing of the existing restrictions MANDATORY for the entire state. The bill includes rules that limit how much can be charged to install any new utilities as well. It also waives all existing parking requirements.

I'd bet more money than you've got in your checking account today that a garage conversion on an existing property in Oakland would be a slam dunk, and a backyard ADU, with minimal setbacks, has a better than 90% chance of being approved. The bill was deliberately written to encourage the construction of this type of housing, because we are experiencing a severe housing shortage in our state. Too many locales were practicing NIMBY-ism, and the Governor wouldn't stand for it.

What I'm a bit unclear on is why it means so much to you.

[mm1970]

Secondly, I wouldn't count on zoning laws allowing you to convert a garage into a bedroom or sticking mobile home in the backyard.

You clearly wouldn't, but OP can count on it. New laws were enacted in January of this year to make it easier to add Auxiliary Dwelling Units (ADUs), basically anywhere they can be squeezed in, and local municipalities can't do anything about it. Permitting costs were lowered, too. That part of the plan is 100% feasible.

So there are absolutely NO building codes associated with these new ADU's?
There are NO property setback laws for detached units?

A 5 second Google search shows that you are wrong.
It looks like there is a 4ft setback requirement for new detached units, so they can't just be "squeezed in anywhere".
 And you would need to get water/electric/sewer to the building, which involves extensive permitting.
I also see a 104 page document of Oakland amendments to the California building code.  In it, I'm guessing it says you can't just throw a mattress in the garage and consider it a bedroom.  There are surely requirements that need to be met (egress, windows, closets, proper electrical outlets, ect).

I didn't say there weren't building codes, just that our Governor has made easing of the existing restrictions MANDATORY for the entire state. The bill includes rules that limit how much can be charged to install any new utilities as well. It also waives all existing parking requirements.

I'd bet more money than you've got in your checking account today that a garage conversion on an existing property in Oakland would be a slam dunk, and a backyard ADU, with minimal setbacks, has a better than 90% chance of being approved. The bill was deliberately written to encourage the construction of this type of housing, because we are experiencing a severe housing shortage in our state. Too many locales were practicing MIMBY-ism, and the Governor wouldn't stand for it.

What I'm a bit unclear on is why it means so much to you.

Dicey's right about this one.

My city tried to put in realistic requirements - in order to get an ADU approved, it had to be owner occupied and had to have additional parking unless within 1/2 mile of public transportation.  That was struck down by the state.

[goat_music_generator]

Secondly, I wouldn't count on zoning laws allowing you to convert a garage into a bedroom or sticking mobile home in the backyard.

You clearly wouldn't, but OP can count on it. New laws were enacted in January of this year to make it easier to add Auxiliary Dwelling Units (ADUs), basically anywhere they can be squeezed in, and local municipalities can't do anything about it. Permitting costs were lowered, too. That part of the plan is 100% feasible.

So there are absolutely NO building codes associated with these new ADU's?
There are NO property setback laws for detached units?

A 5 second Google search shows that you are wrong.
It looks like there is a 4ft setback requirement for new detached units, so they can't just be "squeezed in anywhere".
 And you would need to get water/electric/sewer to the building, which involves extensive permitting.
I also see a 104 page document of Oakland amendments to the California building code.  In it, I'm guessing it says you can't just throw a mattress in the garage and consider it a bedroom.  There are surely requirements that need to be met (egress, windows, closets, proper electrical outlets, ect).

I didn't say there weren't building codes, just that our Governor has made easing of the existing restrictions MANDATORY for the entire state. The bill includes rules that limit how much can be charged to install any new utilities as well. It also waives all existing parking requirements.

I'd bet more money than you've got in your checking account today that a garage conversion on an existing property in Oakland would be a slam dunk, and a backyard ADU, with minimal setbacks, has a better than 90% chance of being approved. The bill was deliberately written to encourage the construction of this type of housing, because we are experiencing a severe housing shortage in our state. Too many locales were practicing NIMBY-ism, and the Governor wouldn't stand for it.

What I'm a bit unclear on is why it means so much to you.

Kind of a digression: There have definitely been cases in the Bay Area of municipalities ignoring state law and not approving developments they should have. For example, a 3-house development in Berkeley (3! fucking! houses!) where they were sued *multiple times* over several years, for *repeatedly* rejecting a project that they were legally required to approve.

My impression is that Oakland is more chill about this sort of thing, though.

[researcher1]

I didn't say there weren't building codes, just that our Governor has made easing of the existing restrictions MANDATORY for the entire state.

I'd bet more money than you've got in your checking account today that a garage conversion on an existing property in Oakland would be a slam dunk, and a backyard ADU, with minimal setbacks, has a better than 90% chance of being approved. The bill was deliberately written to encourage the construction of this type of housing...

No, what you said was that the OP "can count on" being allowed to turn a garage into a bedroom and that a mobile home could be placed "anywhere they can be squeezed in", and that this plan is "100% feasible."

This is false, and you admit as much yourself.  It went from being able to count on it 100% to being a 90% chance (your words).
And even your lowered figure is completely made up.  You don't know what the site looks like, the elevations, where the ingress/egress points are, where the existing water/electric/sewer lines are, ect.  Without knowing this, you have no clue whether it is feasible. 

Regardless, you were wrong about being able to "squeezing these units in anywhere", given the clearly stated setback requirements.

What I'm a bit unclear on is why it means so much to you.

It doesn't mean so much to me.  I simply warned the OP that he shouldn't count on being able to do this.
You are the one that claimed I was wrong and that he can count on it 100%.

I'm just pointing out that it's you who is wrong.  This is common sense and there is no way you can possibly substantiate your wild claims. 
You would need an intimate familiarity with this particular house, this particular lot, and the 100 pages of building codes to say the OP "can count on" this being "100% feasible."

[Paul der Krake]

Yeah so there's going to be a minimum of 4, possibly 5 adults.

Two "owners", and two (or three) boarders (with benefits). Adults have opinions. You can't ground them or take away their toys. Worse, they typically come with their own car. They get other adults to take their side when there's a conflict.

You better be prepared to essentially live in a sociology experiment, because that's what you're signing up for.

What does your SO think of all this?

[Freedom2016]

IME equal property ownership (equity) is extremely undesirable because there is no way to break a tie in the event of a disagreement. I mediated a conflict between two 50% business owners, and while they had started off friends, by the end one partner wouldn't budge and forced the dissolution of the business (when it was the other partner's brainchild and baby!). Consult a lawyer, for sure.

[firestarter2018]

I don't see any realistic way that you and your friend could even get approved for a mortgage given these details. No bank will offer a $500,000 mortgage to someone with a $51K income, plus they wouldn't count the potential rental income from your SO's/friends, plus there's the minor detail that you would also have to pay back your father, which would be another mortgage payment in itself (albeit an informal one). So the math won't fly, and you probably already know that.

Does Oakland have any intentional community co-op's that you could look into?  Sometimes those have easier buy-in criteria for those with lower incomes...granted, it wouldn't be just you and your friends, and the equity structure would obviously be very different, but could be another option. I had some friends that were in a co-op in the Bay Area many years ago, I wish I could remember the name.

[former player]

I don't see any realistic way that you and your friend could even get approved for a mortgage given these details. No bank will offer a $500,000 mortgage to someone with a $51K income, plus they wouldn't count the potential rental income from your SO's/friends, plus there's the minor detail that you would also have to pay back your father, which would be another mortgage payment in itself (albeit an informal one). So the math won't fly, and you probably already know that.

Does Oakland have any intentional community co-op's that you could look into?  Sometimes those have easier buy-in criteria for those with lower incomes...granted, it wouldn't be just you and your friends, and the equity structure would obviously be very different, but could be another option. I had some friends that were in a co-op in the Bay Area many years ago, I wish I could remember the name.

But OP doesn't need a $500,000 mortgage.  They already have $200,000 to put down, which means a $300,000 mortgage requirement.  That could be reduced with a family loan and there is income from SO's rent and another possible tenant as well.  Plus OP is looking at an imminent pay rise to $63k.  Do please get your facts right.

I used to live in a VHCOL area which may have affected my opinion on this one, and I'm not minimising the issues of disagreement over the house management and possible relationship breakdown with the co-owner, but this is looking like a potential mustachian house-hack to me.

[Dicey]

I didn't say there weren't building codes, just that our Governor has made easing of the existing restrictions MANDATORY for the entire state.

I'd bet more money than you've got in your checking account today that a garage conversion on an existing property in Oakland would be a slam dunk, and a backyard ADU, with minimal setbacks, has a better than 90% chance of being approved. The bill was deliberately written to encourage the construction of this type of housing...

No, what you said was that the OP "can count on" being allowed to turn a garage into a bedroom and that a mobile home could be placed "anywhere they can be squeezed in", and that this plan is "100% feasible."

This is false, and you admit as much yourself.  It went from being able to count on it 100% to being a 90% chance (your words).
And even your lowered figure is completely made up.  You don't know what the site looks like, the elevations, where the ingress/egress points are, where the existing water/electric/sewer lines are, ect.  Without knowing this, you have no clue whether it is feasible. 

Regardless, you were wrong about being able to "squeezing these units in anywhere", given the clearly stated setback requirements.

What I'm a bit unclear on is why it means so much to you.

It doesn't mean so much to me.  I simply warned the OP that he shouldn't count on being able to do this.
You are the one that claimed I was wrong and that he can count on it 100%.

I'm just pointing out that it's you who is wrong.  This is common sense and there is no way you can possibly substantiate your wild claims. 
You would need an intimate familiarity with this particular house, this particular lot, and the 100 pages of building codes to say the OP "can count on" this being "100% feasible."

"Mobile home" is a term that was only used by you. Not me, not the OP. As to the rest, sure..I don't know what I'm talking about. Except I have extensive Real Estate experience, I live in the same general area, I've been FIRE for nearly eight years, with a huge chunk of my NW derived from property ownership. I'm currently helping a neighbor who wants to build an ADU for her MIL on a tricky lot. But sure, what the hell can I possibly know? And what do I care about being right? You clearly do, and I have no fucks to give, and nothing to prove, so please, take your victory and savor it with my compliments. All the best to you.

[dragoncar]

The proposal here is to go 25/25/25

25/25/25 is a great deal.  That's like a 25% discount right off the bat!

[researcher1]

"Mobile home" is a term that was only used by you. Not me, not the OP.

You're definitely grasping at straws when you start parsing words and arguing about semantics.
Isn't mobile home another term for a "home on wheels"?  That is exactly how the OP described it in his first post.

Except I have extensive Real Estate experience, I live in the same general area, I've been FIRE for nearly eight years, with a huge chunk of my NW derived from property ownership. I'm currently helping a neighbor who wants to build an ADU for her MIL on a tricky lot.

Then you should know that YOU can't possibly claim the OP's situation is "100% feasible", a "slam dunk", that he "can count on" being allowed to do these things and put a home on wheels "anywhere they can be squeezed in".

Your earlier post already acknowledged that you were wrong, that it is NOT "100% feasible."
I don't know why you even tried to claim this.  A 5 second search shows you can't possibly say this with 100% certainty without having detailed, first hand knowledge of the property...
A detached ADU may extend into a required side and rear setback up to 4 feet from the lot line. No more than 50% of the horizontal area of the required rear yard may be covered by structure over 6 feet high.

You have no clue if there is enough room in the backyard to abide by these setback and coverage laws.  And this is just one small facet of plopping a mobile home in the yard.  New utility connections may not be feasible due to a multitude of factors, and depending on the address, the OP may need to provide a parking space.

[Dicey]

I conceded already. You won. Stop piling on.

[goat_music_generator]

You better be prepared to essentially live in a sociology experiment, because that's what you're signing up for.

Have you been to the Bay Area? :-) Lots of people living happily in sociology experiments around here. I recommend trying it sometime -- some experiments have results you might not expect.

@researcher1 : Chill the fuck out.

@mitchm : Here's a thought. Lots of commenters here saying you can't do this because you don't know if it'll work out, if you'll be compatible living with this person, etc.; not a lot suggesting ideas for dealing with that problem.

My spouse and I actually had the same idea, of doing long-term coliving. We decided to do a "test run" first by renting an apartment with the couple we had talked to about doing this with on a year's lease. That way we could get a sense of what it's like to live with each other, get to know each other better, etc. This might not be so necessary for you and your best friend (my spouse and his close friend in the other couple were in a similar position), but it could be very helpful if either/both of you have partners, kids, pets etc. who would need to get to know each other. And for that matter, if you and your friend haven't lived together before, it would definitely be a good idea if only for that reason. Find out what each other's living triggers are ("I can't deal with someone else being in the kitchen at the same time!" -- that one's me) and if yours are compatible.

It would mean giving up on the ONE SPECIFIC house you're looking at, maybe; but we're likely in a housing downturn, and better to get a slightly worse house than to end up with a mortgage with someone you can't actually stand living with.

(Spoiler alert: the situation with my spouse and I and the other couple isn't going to work out. Turns out, we're just too different. Sad, but better to find out now than after buying a house!)

[researcher1]

Have you been to the Bay Area? :-) Lots of people living happily in sociology experiments around here. I recommend trying it sometime -- some experiments have results you might not expect.

The CRITICAL difference is the OP is going to conduct such an experiment by splitting the purchase of a $1M house with a friend, and do so on a $50K/yr salary.
This is a far bigger experiment than simply renting a room with a group of people on a month-to-month basis.

@researcher1 : Chill the fuck out.

Why are you telling me to chill out?
You need to tell that to the people giving bad/false advice to the OP.

I simply said the OP shouldn't "count on being allowed to convert a garage into a bedroom or sticking mobile home in the backyard."  That is sound, accurate advice.

Dicey chimed in to dispute this, incorrectly telling the OP that such things were 100% feasible, among other things.  Had I not pushed back on Dicey's incorrect assertions, the OP could have acted on this bad information.  It's not my fault it took several posts for them to concede that they were wrong.

[mitchm]

Thank you all; the advice here has been invaluable and you are all exactly the kind of people I trust to really dig in and share all of the pros and cons. I did go look at the house today with the prospective co-buyer and it was pretty spectacular. The upstairs unit is totally self-contained with a separate entrance. The downstairs space is huge - 2 bedrooms, 2 living rooms (almost kind of unfortunate as it isn't a great use of space) and a furnished basement as well as a garage (with a window in it!). The backyard is huge and basically a fruit tree orchard.

Anyhow, prospective co-buyer and I had an at-length conversation (and also looked at this thread together!) and decided that it would indeed just be too complicated and potentially detrimental to the friendship -- especially on a ridiculously short timeframe as house has been on the market for 7 days and offer deadline is TOMORROW! -- so are not going to attempt the tenancy in common.

After talking it over with pops, however, I am considering making an offer with him as cosigner with 400,000 down (2 from me and 2 from him as essentially a gift) and a 30-year mortgage. Based on some quick mortgage calculator numbers that would leave about a $4000 monthly payment including property taxes and insurance. If my partner and I take the smaller upstairs unit and pay $2000 for it (essentially what we together are paying in rent now), we could rent the first floor for $3000 (probably below market for a huge, renovated 2 bedroom with office and garage) to cover the mortgage. Likely even more if we decided to rent to strangers rather than friends.   

Anyhow, given that there will probably be tons of offers at up to 20% over asking (898k) this is all still probably a pipedream. But this has all been a useful exercise, so thanks again everyone.

Also not that it is really relevant here but again I feel like I should reiterate that I am not at all dead set on being a homeowner -- this is not about the bogus (in my view) idea that paying rent is "flushing money down the toilet," which I have never believed. It is absolutely about having very high confidence that I would like to live in Oakland indefinitely and do not want to bounce around apartments until I get priced out.

[clarkfan1979]

If both parties make 51K/year and you are seeking a 600K mortage, it will be close for qualifying. However, considering you have plans for rental income, it wouldn't be that risky.

600K mortgage at 3.5% = $2,694
Taxes = $833
Insurance = $400 (guess)

Total = 3,877

45% of 102,000/year is $3,875

I bought a house when my total debt to income was 47% on paper when adding the mortgage. They wouldn't count my wife's income of 12K/year because it was part time work and she was doing it for less than 2 years. They wouldn't count the rental income of the mother-in-law suite of $1,600/month because it's not an official second unit. This is another $19,200/year.

My total mortgage was $2,686/month and with $1600/month for the mother-in-law suite, we were responsible for $1,086/month.

[mozar]

I'm curious about what offer the owners end up taking.

[affordablehousing]

Glad the OP responded, I had hoped he/she was missing because they were busy getting their offer in. Just another thought, if you know you want to stay in Oakland, the price is a little irrelevant. Imagine in 15 years when people will wistfully remember when you could say, "yeah I only paid a million for my house" when dumps are $2MM! So I think you're young, you can grow into more of the house as you earn more money, and you seem to only see the empty rooms as income opportunities. That's how I would have approached it in my 20's. This is about locking something down of your own and ensuring you remain forever. What's the point of a generational wealth transfer if you don't have time to let it build something useful for you if you've already had to leave the bay area?

[socaso]

I knew 3 friends who went in on a house in the Atlanta area. They also had a 4th friend who came onboard as a renter. As far as I know, everything went well with the situation. The parties in question are all still friends.

I know a lot of people in San Francisco with housing arrangements that would seem weird to people in other cities but they make it work because they love San Francisco. Anything you buy there is going to appreciate and you will always be able to find renters.

You want to consider every possible situation that might come up and create a living agreement that covers how you will handle them. People in this thread have provided some very good ideas to consider.

[We be free if we try]

Speaking as a residential architect and homeowner in SF hoping to sell a house Within the next year, I’d wait til the winter and purchase then, or even later. I’m betting we see a 5% housing price drop here over 6-12 months due to sagging economy and techies moving further out. Trying to figure out when to sell ours.... $50-75k price drop, yay!

[jeromedawg]

I'm in somewhat of a similar situation potentially with my siblings though with way less of an up-front investment. Nothing is set in stone but down the horizon my parents may decide to gift us one of their rental properties and then we just figure out what we want to do with it - it needs probably $70-80k of work to fix things up as the up-front investment. But my brother who lives closest doesn't want to get back into the rental market there with the rent control situation (says it's just a big headache).
He has been considering keeping it as 'family-use' for anyone who might need it who is immediately in the family and who we would ultimately not charge rent for (his mother in-law is the closest candidate for this since she lives locally and is looking to retire soon).
The split of money out of this would come when we go to eventually sell (whenever that is). But yea, if we did this three ways, we'd be fronting like $20k-30k each. Since it would be for helping family out, I don't think I'd mind as much as long as the the agreement is fair and I won't be responsible for paying for property taxes or maintenance if I or anyone in my own immediate family (wife/kids/my in-laws) aren't going to be making use of the place. Essentially, we would just be acting as 'private' money towards a family investment and not demanding any sort of monthly or quarterly income from it.

I'd be hard-pressed to do anything remotely like this even with someone I consider a "best friend" unless we literally grew up together, lived in the same household, did everything together and could finish each others' sentences. I've heard too many stories of these kinds of situations going south between "friends" and "best friends". My brother in law co-signed for an apartment in SF with a "good friend" and the scumbag ended up unlawfully evicting the tenants, bringing a lawsuit upon them, then fled the country and left my BIL with the burden of the trial - I think he ended up settling in the tenant's favor but it pretty much wiped out a majority of his savings.

So that said, I'd be extremely wary of tenancy in common or joint tenancy type situations when it comes to non-family members. Just my personal opinion speaking from my own experience as well as the experience of someone else who has done something similar (and other anecdotes)

[betsbillabong]

After talking it over with pops, however, I am considering making an offer with him as cosigner with 400,000 down (2 from me and 2 from him as essentially a gift) and a 30-year mortgage. Based on some quick mortgage calculator numbers that would leave about a $4000 monthly payment including property taxes and insurance. If my partner and I take the smaller upstairs unit and pay $2000 for it (essentially what we together are paying in rent now), we could rent the first floor for $3000 (probably below market for a huge, renovated 2 bedroom with office and garage) to cover the mortgage. Likely even more if we decided to rent to strangers rather than friends.   

Do it! I totally hear wanting or needing to stay in a VHCOL situation and I lived in SF from 1993-2002. It sounds like you can totally make it work. I would go for it.