How to Buy a Home With Your Friends & Family

Dave:
Do you know that thing that seems to happen within every group of friends where you start talking about living together, maybe buying some acreage and putting up a compound, or starting some sort of co-living situation? I know this has happens with me, my friends, and some people in my family. Henry, have you ever heard this?

Henry:
Oh man, we have talked about this all the time, but it never happens because life happens and it pretty much sounds expensive, right?

Dave:
Yeah, it does. And no one takes on the actual work and legwork of making this actually happen. But today we’re gonna talk to an investor who is making this happen. Hey everyone. Welcome to the BiggerPockets Real Estate podcast. I am Dave Meyer. He is Henry Washington. Henry, thanks for being here.

Henry:
Hey, man. Happy to be here. Thank you so much. Yeah. Today we’re talking with Phil Levin and we’re talking all about the value of living near or renting near groups of your friends. So we’ll talk about the ins and outs of how you can coy a house or co rent a house, and we’ll talk about how investors can capitalize on the increasing demand for people who want to live near their friends and family. I know I actually did this by accident when I bought my first condo, and it was one of the greatest living experiences I’ve had in my lifetime.

Dave:
That’s super cool. I’m very interested to hear about your story, Henry and Phil’s story. So let’s bring ’em on. Phil Levin, welcome to the show. Thanks for being here.

Phil:
Hey, great to be here. Thanks for having

Dave:
Me. So I understand your story that we’re gonna just talk about today begins with a conversation you had with your then girlfriend who is a behavioral scientist. Take us back to scene. Tell us how you got this whole thing rolling.

Phil:
Yeah, yeah, yeah. You know, so you, you think life’s gonna turn out one way and then it turns as it turned out a different way. Um, this is definitely one of those experiences. So my, my wife’s a behavioral scientist. Um, she studies what makes people happy and healthy and we end up testing a lot of her ideas, sort of in our, in our own life. Um, and the big one was when we were having sort of the like, let’s move in together conversation for the very first time. And, you know, I, I thought we were gonna go do quote the normal thing and like, go get an apartment together. Uh, just the two of us. But she had other ideas. Um, and so she, she told me about this thing called the law of proximity. Um, and it’s sort of like the, like rule of her life and the law of proximity is that we, we are like highly influenced by what we surround ourselves with.
And so like if we move near a, uh, a pizza shop, we’re gonna get fat. If we move near a gym, we’re gonna get fit. Um, and if we surround ourselves with great people, we’re gonna live a happy, healthy, well supported life. And so she sort of said the important thing is not like what our like physical space looks like that we live in. The important thing is what’s around us. And we’re always gonna design our housing to sort of be around the people we wanna be around and, and actually care less about the physical space itself. Um, and so we ended up, uh, you know, first moving into like a big house with like nine of our friends when we were like younger. Um, now that we’re a bit older and we’re, we’re having kids, uh, we have a different setup. So where we have, uh, uh, 10 housing units sort of in a cluster, um, very close together and we have, uh, 19 of our friends and, and five kids all under the age of three all living together.

Henry:
Yeah. So I think this is really cool mostly because, uh, this is something that we are now looking at doing now that my wife and I have two kids and our, our her parents, my in-laws have like 50 acres. And so now we’re looking at ways that we can purchase some of that acreage so that we can build a house out there just so that we can raise our children around their grandparents. And uh, that’s just a unique perspective, but a lot of people are interested in this lifestyle. I think a lot of people consider this or look at this as homesteading, but it’s less about like the farming aspect and like living off the grid. It’s more about just being around the people you care about. Is that what I’m hearing?

Phil:
Yeah, that’s exactly

Henry:
Right. Yeah, I mean, I think that’s perfect. ’cause I think a lot of people’s like, uh, apprehension or barrier or entry to this is that land costs a bunch of money and building a bunch of houses cost a bunch of money and I want to do this, but I don’t know how. So what are some of the like modern ways or the different ways people can try to coordinate and live close to their friends and family?

Phil:
Yeah, let me maybe give you a couple of form factors, um, that we sort of see out there. Um, so one is something that we call the mini hood. And by we, I mean my company live near friends, uh, which is we, we are helping people do this. Uh, so, uh, the mini hood is essentially where you take a small radius. So you basically draw a circle. Um, and we tend to like a 10 minute walk radius, which is where we sort of see as like very close. Um, and you just tell all your friends and family and your people, hey, buy or rent a home inside that circle. And like some people might want a bigger home, some people might wanna rent, some people might wanna buy. Um, people have different amounts of money, but like everyone can sort of find the space that they want within that circle.
A second form that we see is a, uh, actually renting multiple units in an apartment building. You know, so right, right now, like multifamily, uh, is sort of, is sort of getting killed a bit. Uh, there’s a lot of vacancy in these buildings. Uh, it’s pretty easy to go up to a building and say, Hey, you know, me and my two friends or my two family members are gonna take three units off your hand. Um, will, will you do this? And like, most likely, not only will they do it, they’re gonna give you a big discount. Uh, another form we see particularly in sort of expensive coastal markets is you have a lot of these new, um, a DU laws, um, that are coming on the books. So it, it’s very easy now to like build an extra unit on a property. Um, and so a form factor we see a lot of this is like, you got the house and then you’re building the extra unit for one of your friends or your family members. That’s

Dave:
Super interesting. Phil. I never really thought about the idea of like collectively bargaining for rent. Like if you have a several units that you’re interested, and as Phil stated and we’ve talked about on this podcast many times, multifamily is facing this glut of supply right now where a lot of inventory is coming online all at once. And so people will, you know, operators and multifamily are willing to do deals. And that’s just a very interesting option. If you are thinking about, uh, you know, renting a property, maybe you can do that. Or if you’re a multifamily operator, maybe you can find a way to fill up some of your vacancies by working with a group that wants to be, uh, living together.

Phil:
Yeah, it’s actually this, um, for, for the multi-family operators, Dave, there, there’s a stat out there, which I think they should all know. Um, that if someone has a close friend or family member living in their building, they’re 30% more likely to renew their lease Whoa. Than the average person. And so if you think about like, you know, the biggest cost to an operator is turnover. Like, you know, I I think you can actually give a lot of your economics, um, and discounts in order to get this, um, and, and still actually come out on top as an operator.

Dave:
That’s super interesting. So even if you were to give sort of like a, you know, a move in discount or even a a a reduction in rent to get three units, you might be getting three people who are gonna stay for five years instead of for one year or two years.

Phil:
That’s right.

Dave:
Super interesting. So I, I do wanna get into sort of the economics in it a little bit. But you know, you started this conversation talking about how, you know, this is good for people. Like what are some of the benefits to living near your friends? Are there any like quantifiable or measurable things that you can share?

Phil:
Yeah, so I, I, I can tell you some of the stats, but maybe I’ll just share some of the like, anecdotes from my own life just ’cause like a lot others, I work on this ’cause I’ve experienced it and I’ve seen how good it is for me. Um, and Henry, you talked about you have two kids. Um, so we, uh, we, we all live at, um, close enough to each other where we’re within baby monitor distance. Um, which means that like we can hand the baby monitor to one of our neighbors and say like, you watch the kid, which isn’t a big deal, you’re just like holding onto this thing. Um, and then me and my wife Kristen can just leave. We can just go out, we don’t have to hire a babysitter. Um, and I can do that pretty much every single day. We want to do it sort of on no notice. And so like, think about what people pay for babysitting or think about people like stuck in their homes with their kids at night. So basically after 7:00 PM we just get the go and it’s ’cause we have a friend next door. It’s a huge lifestyle change, uh, because of that like one choice.

Dave:
So you’re saying basically your kids go to bed, you walk next door, you give your neighbor the baby monitor and says, you know, if the kid wakes up and needs something, go over there. Meanwhile we’re gonna just go do something else. That’s

Phil:
Right. And like our friends, they know our kid, right? They’re, they’re our next door neighbors. Uh, they’re close to arcade, our kid knows them. So like, if, if something happens, which usually doesn’t, um, they can walk in and there’s like a familiar face. Um, and it’s just not that big of a deal to do that for them.

Dave:
I don’t have kids, but I imagine that would be a lot of financial saving and just good for your relationship.

Henry:
First of all, this is huge and like I do this, but like, it wasn’t intentional. So like our sister-in-law lives with us. And so sometimes we’ll just say, Hey, can you keep an eye on the monitor? And then my wife and I’ll go hang out. And it’s been a blessing to our marriage. It’s been, uh, amazing. And I know not everybody kind of gets a a, a live-in nanny, but you explaining this co-living situation, like people can curate this environment for themselves. And I’m telling you like it’s a game changer for like, when you just need that moment to get away from the house. And, uh, <laugh> it’s funny, it’s funny this, it, it can, it is an economic benefit, right? ’cause you’re not paying for childcare. But I’d say it’s, it’s a far greater marriage benefit. Yeah. <laugh>. Uh, and maybe you don’t pay for as much marriage counseling, so I mean there’s a financial benefit there as well. <laugh> <laugh>. Yeah. Well

Phil:
Let’s actually talk about the marriage benefit. I I, I think I’ve seen that too. So it’s like, you know, you get a little t with your partner happens sometimes, like the ability to just to like sort of like walk outside and just like walk into your friend’s house and like sit down and talk about, have a beer like right on the spot as opposed to playing the coordination game of like, Hey, when you free next week, oh no, no, good for me. How about two weeks? No, no. You know, that thing that people do, um, that sort of like disintegrates friendships over time. Um, you know, IIII think having the like, spontaneous, um, you know, unplanned social interaction is like sort of the way that we’re like meant to, meant to live it. It’s really just a question of how much coordination and design you want to do in your life.

Dave:
That’s so funny. I was actually just reading a book and they were just talking, it totally not related to real estate, but they were just talking about like, when you don’t like people, humans just love doing favors for each other. And when you don’t ask for help, you’re like robbing someone else of the opportunity to have that fulfilling experience of helping someone that they care about. We’ve now learned how people living together or close by one another can be positive for the investor, landlord, tenant, everyone. But what are the sort of quantifiable benefits that come from this, this and more after the break?

Henry:
Welcome back to the BiggerPockets podcast.

Dave:
Alright, so, uh, you mentioned something about Co-buying ’cause I think that is sort of a, a common idea right now with, with interest rates. So high housing affordability at, at the lowest point it’s been since the 1980s, I think for, you know, uh, for people home buying, it’s a, it’s an interesting idea that I’d love to talk to you about. And as an investment option too, we hear a lot more people, we usually just call it a partnership in real estate investing, but I guess if you’re living there, it’s sort of coying. So, uh, can you just tell us about like what Co-buying is and who it might be good for?

Phil:
You’re, you’re right to sort of like split these as like, you know, Co-buying as a, as an investment versus coine as a, as a lifestyle. And I I think they’re, they’re, they’re trying to achieve different things. Um, so Co-buying as an investment is trying to achieve financial returns. Um, Co-buying as a lifestyle is trying to, you know, make for yourself the best lifestyle possible. Um, and those are two different goals. Um, you know, I I I think, I think you need to think a lot about the who. So like, you really want to make sure you’re going to this with a person that you, you trust than a person that you’re gonna like set up life with. Um, so for a lot of people, this is a family member. For some people it’s a good friend. Um, I think, you know, parents who are like having kids around the same time, for me that’s like a very nice setup.
You do nanny shares together, um, and, uh, and make much like, make life much easier on yourself in in that, in that time. Um, so I-I-I-I-I think there’s like two sort of broad ways that you might want to think about structuring this. Um, so the first way is that you’re both, you’re both sort of like 50 50 buyers in the thing. So let’s take the example of a duplex. It’s like both you’re buying it, uh, you’re gonna live in one unit, I’m gonna live in the other unit. Uh, there’s a couple sort of legal structures that like allow for this. Um, so A-A-T-I-C uh, tenancy in common is one of them. Um, where essentially you’re just like splitting up the space and saying, that’s your space. That’s my space. Um, you can actually sell a TIC share separate, so I, I could sell my share to someone else externally.
And then that’s actually a fairly common thing to happen in a lot of markets. Um, but there’s another way of doing it, which actually we see, which is, you know, oftentimes like the two people are not on the same financial footing. You might have like the friend or the family member who actually just has like, a lot more means than the other one is like a fairly common thing. And in that case, you wanna explore something slightly different. And so something that we see a lot is like, you know, let’s say Dave, you’re the person with the money. You’re gonna buy the thing and I’m gonna pay you rent and we’re both gonna like, live together. Um, and of course there’s like a little bit of awkwardness maybe around the fact that I’m paying my friend rent, but we’re friends and we can work this out and, and we get to set up life together. Uh, and so you’ve essentially created like, you know, your own primary home in one of the units and an investment property in the second unit, but instead of a random person, you need to manage and have all the pains of that with it. It’s your buddy and you might actually be willing to like charge a little less rent for your friend. Like they’re gonna help with the maintenance, they’re not gonna cash the place.

Dave:
Yeah. ’cause they’re probably gonna take care better care of it than than a random person. Yeah.

Phil:
Um, so that, that might be a good idea, but financially and in terms of, in terms of your happiness. Got

Dave:
It. And Phil, I I understand that you are also a developer, right? So you’re, you’re developing these types of communities, or tell us about that.

Phil:
Yeah, so I, uh, I I come from a real estate development background. Um, I was one of the founding team members of cul-de-sac, um, which is developing sort of like large scale neighborhoods from scratch. Um, and we, we do, we do walkable neighborhoods. Um, so there, there’s, there’s, there’s no cars in them. Um, so the, the first one’s in Tempe, Arizona, uh, it’s a $200 million development. A thousand people are gonna live there. Um, so I sort of come from the, like the big real estate development background, but my, but what I’m working on live Near Friends is it’s a platform for like small scale developers and small scale people to like set up these sort of arrangements for themselves. So I’ve sort of gone to the other end of the spectrum, um, having seen like how painful and how long it takes to actually develop big real estate. And, and, and I’m now working on like, how do you get like thousands and tens of thousands of people to develop like small real estate and actually have it be like a different theory of like how you, how you bring things to scale in the market.

Dave:
So what, can you give us an example of like, what does one of these small scale developments look like?

Phil:
We basically want to become the Airbnb of this category of housing, which we call proximate housing. Um, and so we wanna make it easy for a developer or a home flipper to sort of say like, Hey, like there’s demand for this sort of thing in my market and I can see the demand. I can like log onto the platform and look at it and, and know that if I build this thing or if I flip this thing for this purpose, um, there will be a customer on the other end who, who’s gonna buy it from me or rent it for me.

Dave:
And have you d have you done like a bunch of these so far?

Phil:
Um, I, I have done a few of them in my personal life sort of as a, as a, as a solo developer. Um, so actually the, the place we live now in Oakland is a version of this. And, uh, living near friends will be launching sort of this, the, this feature soon. Um, so we’re not yet working with developers. Um, but what I would say is like, you don’t need us to get started. Um, so if you think there’s demand for this sort of thing in your market, you can start building towards it for it and, and, and, and see if there’s any, any customers. So, you know, think about like the, the, the duplex that right now is sort of like set up for two strangers. It’s like if you flip that, how can you sort of set up so it’s actually a fit for two people that know each other as opposed to two people that don’t know each other. So like something we see is like yards. So like people will like create like two crappy yards when they could have created like one great yard. That’s an example of a way that you would like design for two people that know each other rather than strangers.

Henry:
I, uh, my brain immediately went to putting those two doors, like in adjoining hotel rooms.

Dave:
Yeah, absolutely. Where you can open it if you want to. Yeah,

Phil:
Yeah. Totally. Totally.

Henry:
To kind of summarize this from an a real estate investor standpoint, do you think this is a niche that like an investor could look into potentially buying property and then giving yourself the option to make it more functional for people to rent from you who want to do this kind of coordinated, uh, co-living experience where you have the option to rent it traditionally to two strangers, but if you also set it up where maybe, you know, there’s a gate in between both fences or there is a door, an adjoining door inside the, the unit or some other amenities that appeals to people who would look to live close to their friends, and then you can market it to those people if you want to, but you could also market it it traditionally, because you’re right, if somebody’s gonna live or if somebody’s 30% more likely to renew their lease if they’re living by friends or family, that’s absolutely something that interests me as a property owner. But you’ve gotta, you also have to be able to do it in a way where you’re not violating any fair housing laws by marketing this property.

Phil:
Yeah. And, and like to that point, so we actually saw, um, a few weeks ago there, there was a, um, there was a property in, in Berkeley about 10 minutes from where, where I live now that had, that had two homes on a lot. Um, and uh, I had three different groups of people text me being like, I’m putting an offer on this thing, there’s nothing else like this. And uh, it ended up going for $800,000 over list.

Dave:
Oh my God. Wow.

Henry:
Over list.

Phil:
Over list.

Dave:
That’s rare because for a lot of, uh, two properties and a lot, you can’t get conventional financing for that. Yeah.

Phil:
So this, uh, I I I think in many cases you actually can, so like, you know, it, it’s uh, you know, anything under four units you should be able to get, you know, reasonably conventional and financing. Um, but uh, yeah, I think, I think, I think the owners were surprised. Uh, my friends are all, all lost out to somebody else who outbid them. Were definitely surprised. <laugh> and, uh, the, uh, yeah, and I think, I think there’s just like a lack of this, this type of housing in the market and there’s a demand for it. Uh, and you know, part of the reason is remote work is a fairly new thing. So it’s like beforehand you would’ve been playing the game of like, oh, I wanna live with this person, but they have a job there and I have a job over there, we can’t do it. Now. People have a lot more freedom to choose where they want to live and you know, they no longer have to like orient that search around their job, which means they can, they can now orient their search around people. And so the, we think there’s gonna be a lot more demand for this sort of housing type and there’s just very little supply of it, which is I think why you’re seeing this. Like, homes go for 800,000 over list if they, if they allow for it.

Dave:
We do have to take a quick break, but more from Phil Levin when we return.

Henry:
Welcome back to the show. We’re here with Phil Levin. Yes. So let’s try to put this into some perspective for people. So if I’m an investor and I’m interested in, um, creating spaces for this, A what should I be putting into these homes? B, how should I be determining if I have demand for my market for this? And then how do I get this product in front of them?

Phil:
So well let’s maybe first talk about the like form factor. So, um, right now you may have an investor or a developer who’s trying to build a large home on a single lot. Um, I think the question I wanted to ask themselves is, would it be better off developing two or three smaller homes on that same lot and and marketing them, marketing them sort of all, all as one? Um, and Henry, I think you’re asking a great question, which is how do you, how do you test that? Like how do you know there’s demand for that? Um, one thing you can actually do is you could actually test out and, and ad for it even before you’ve built it. So like go, go run a Facebook ad saying like, you know, three, three homes on the lot for <laugh>, you know, good for friends. Um, and, and see if you get clicks.
Um, and that might be a good way of sort of testing some in your local market before you make a big investment. Um, another way is you can go back and like, look at similar things that have gone for sale in the past. So like, you know, has there been a property that looks like the thing you might want to build? Um, how did it do, did it sell? Did it sell for for more than list or not? Um, and, and, and that’ll give you a sense of like, you know, might there be a latent un untapped market for this, um, where, where you are.

Dave:
Got it. Great. Well, Phil, is there anything else you think our audience of investors should know about this model that you’re developing and working on or anything they should be thinking about?

Phil:
Let, let lemme maybe mention the story for real estate agents.

Dave:
Oh yeah, good call.

Phil:
If you’re, if you’re a buyer’s brokerage agent right now, uh, things are scary. Yeah. The latest rolling. So maybe one small silver lining. So we, I tell you, we live in this sort of like, uh, cluster of homes in Oakland. Um, and what this looked like is we had eight of our friends buy homes near us. They all use the same couple agents to do that. And so essentially this one lead, which is like me and my wife for these agents turned into $300,000 of commission for the buyer’s agents. So you get to be the agent for the friend group, uh, not just the agent for the person it’s getting, it’s getting like multiple per one. And we don’t know any agents out there who are positioning themselves as having this as their specialty and we think there should be more of them. Uh, so living your friends, my company is gonna be working to build a network of agents in different cities who are gonna specialize in this type of transaction, which is you’re representing the friend group or the family and trying to all do things together. And you can get a two for one, a three for one, a four for one if you become that person for that group. And, and for us it was, it was eight homes, $300,000, uh, just from the sort of the one, the one lead.

Dave:
Wow. That’s pretty awesome. I don’t, yeah, that I, I don’t know anyone else who is, uh, going to be, who presents themselves that way, but that’s kind of like the dream, right? Just get eight, eight commissions at once.

Phil:
Come, come talk to me if you, if you wanna start doing this <laugh>.

Dave:
Alright Phil, well thank you so much for sharing your story with us, super interesting projects that you’re working on here. And for anyone who wants to learn more about Phil and his Company, we will of course put all of the contact information in the show notes below. Thanks again, Phil.

Phil:
Hey, thanks guys. This was fun.

Dave:
Yeah.