Looking for some advice on a buy/no buy decision. The owner of the house in which I've been renting a room for the last ten years is planning to sell it. She has asked if I'm interested in buying it from her so we can both avoid agent fees. It is a two family in the Boston area with a 2 bed / 1 bath unit and a 4 bed / 1.5 bath unit. The two extra bedrooms in the second unit are a bit funky (it's like a converted attic - I'm 6'6 and can't stand up straight in them). The house is dated (weird wood paneling, old kitchen cabinets, etc) but we've had no major issues since I've lived here.
All else equal, I would prefer not to own real estate and had no plans to purchase anything in the immediate future, if ever. As you can tell from my description of the house, I have very little expertise in this area and not much interest in acquiring it and had been planning to just stay in index funds forever. The main reason I've lived in this place so long is because of my relationship with the owner who has benefited from having a stable tenant and so has given me a solid discount on the rent throughout my time here (I've done all the tenant/roommate searches since I moved in). The place would also be out of my price range if I wanted to buy it by myself.
What has me thinking is that a good friend has expressed interest in buying the place together. I know her because she was one of my roommates here for two years and we've kept in touch since. Out of the 20+ people I've lived with over the years, my relationship with her was one of the best. I also know that she has her financial shit together more than most people I know, and is one of the very few people I would seriously ponder doing something like this with. She bought a place not far from here two years ago, but is not a big fan of her neighbors (she's also in a two family) and has been thinking about selling and moving somewhere else. Her place has appreciated solidly in the time she's owned it, partly because of work she's put in - she's pretty experienced and skilled with all the home improvement stuff that would give me nightmares (and is another reason I haven't been interested in buying). My income is somewhat higher than hers but more variable (all 1099 for the past three years), I have more liquid assets so I'd probably be able to contribute more to a down payment. My net worth is $350k pretty much all in VTSAX/VTIAX and my income is around $100k per year.
From a purely financial standpoint, I don't think the numbers favor buying under what I think are reasonable assumptions but I might be wrong. The owner's initial asking price is $900k. The current total rent for the house is $4,750. As I mentioned this includes a pretty hefty discount for me, so I think it could rent (in its current state) for $5,250 without too much trouble. Even so, we're well below the 1% rule (barely above 0.5% if I'm doing the math right). That said, the NYT rent vs buy calculator tells me it's worth buying if rent is above around $4,500 even with some aggressively pro-renting assumptions (9% investment return rate, 2% home appreciation rate, 2% inflation, 4% mortgage interest rate). The house is currently a 15 minute walk from the nearest transit station, but there will be a new one opening about 3 minutes' walk from here within a year or two, which is also likely to increase the rent. I am guessing I could also work the asking price down a bit (the Zillow estimate on the house is $815k). If I bought it I'd likely continue with the same living arrangement I currently have, live in one room and rent out the others, and she would live in the other unit and probably do the same. Which is exactly the setup we had and enjoyed when she lived here.
Overall I'm still leaning towards 'no' but a couple of questions I'm pondering that people here might be able to help with:
1. Setting aside the ownership structure, do the numbers justify even thinking about this any further? Are there other calculators/rules of thumb worth playing around with to gauge whether it might be a good deal?
2. Any particular pitfalls to look out for in terms of buying with a friend, especially from those with experience? There would obviously be a lot of questions to talk through both in terms of the legal structure and logistics of the purchase, ownership share between the two units, and the various scenarios of sale/marriage/death etc but curious to hear any less obvious ones.
3. Any other benefits/downsides of buying directly from the owner of my current residence? I see mostly pros here since I've known and trusted this person for a long time so it seems like that would make things smoother if I were to move forward.