Co-owning a home: Real estate experts weigh in on pros, cons

Purchasing a slice of a home with your friends or family may not be as easy as it sounds.

While the concept of group homeownership isn’t new (think: timeshares), more and more younger generations are reportedly open to the idea of buying one-fourth or even one-eighth of a property amid a volatile and pricey real estate market.

"It's just a natural solution to a growing problem that we face here in America, and that many cities face around the world," co-founder and CEO of Pacaso – a property broker which lists shares of vacation homes – Austin Allison told Fox News Digital.

"There's so many examples of companies that are creating sharing economy solutions to old problems," the CEO added, "and co-ownership is effectively a sharing economy solution to a housing affordability problem. So I think the younger generation is just more familiar with innovative and sustainable structures like this."

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After Pacaso’s founding in 2020, the brokerage has sold about $1 billion in co-ownership units across 40 markets, mostly in the U.S., and manages approximately 1,500 clients in housing LLCs and operating agreements.

And though Pacaso promises to handle "all the things that would typically produce friction or headaches in the D.I.Y. co-ownership process," Madison Ventures+ principal and managing director Mitch Roschelle advised against the idea.

"People who are promoting shared homes are basically trying to sell parts of homes for more money," Roschelle also told Digital. "So there's the economic incentive for those in favor of the strategy."

"The value proposition for the buyer is, ‘But look at it this way: I get to own something and I don't have to pay for the whole thing… I don't want to eat the whole pie. I know it's cheaper. I just bought a slice.’ That's the basic, sort of yin and yang between why the buyer wants the slice and why the seller wants to sell pieces as opposed to the whole."

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Despite market analyst pessimism, Pacaso recently launched a new legal suite of services starting at just $250 to help more interested parties enter co-ownership agreements, with its CEO citing a surge in interest.

In fact, Zillow’s 2023 housing trends report found 1 in 7 respondents co-bought a property with a friend and 12% with a relative last year. Backing up the data, Opendoor’s first-time homebuyer report released in March found that more than 3 in 4 first-time buyers bought with their parents, siblings, friends and even colleagues.

"Managing the home can be difficult. Financing the home can be difficult. Coordinating repairs and maintenance can be difficult between co-owners," Allison admitted. "So this is something that, as a co-owner, you want to go into with eyes wide open, and at Pacaso, we're trying to make that experience easy for you."

Pacaso's co-ownership properties are primarily vacation homes located in the U.S.

"We're seeing co-ownership grow in popularity, mainly because homes are less affordable today than they were in the past. And that's not getting any better with time. It's only getting worse," the CEO added. "Co-ownership is part of the housing affordability solution because it enables people to afford homes by pooling their resources together with other families that they would otherwise not be able to afford."

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Roschelle countered that the co-ownership market is actually "really, really small," claiming he knows more real estate investors who rent individual bedrooms within a home.

"There are not many niches in the real estate industry where I don't know people. This is one of them. I don't know anybody that wants to do this," he said. "I think it's so complicated that [if] you need an LLC to buy it, you know what? Don't buy it."

But both industry leaders agree this may be a more attractive option for younger generations and first-time homebuyers.

Pacaso CEO and co-founder Austin Allison on his company, a service to expand second home ownership.

"It's geared towards younger millennials, Gen Z who are first entering the home market – that's 100% who it's geared towards. The closer you are to college, the more blind you are to the challenges of living together," Roschelle said.

"But it doesn't mean that all friction will be eliminated if you are doing co-ownership on your own," Allison also said. "There's definitely an element of interacting with other people that has to be taken into account and consideration."

"Homeownership is a dream for many families," Pacaso’s CEO added. "There are many reasons why somebody would want to own real estate, and co-ownership makes it possible for more people, because there's just a lot more people who can afford to own part of a home than people who can afford to own the whole thing."

And if you decide you eventually want out of a home co-ownership, the experts recommend not doing that alone, either.

"This isn't just an apartment, it's a home that you own. How complicated does that get?" Roschelle emphasized. "So, I think it's a bad idea all the way around. And the only person making money from it is the person who's building them, who's trying to sell the pie for more in slices, as opposed to the whole pie."

Madison Ventures Plus managing director Mitch Roschelle discusses the challenges young people face buying a home on 'Varney & Co.'

"If you and two or three of your friends decide to buy a property together and one of you wants out of the property, there's not an easy way to find another co-owner for your share. With Pacaso, we've made that process easy," Allison explained. 

"Anybody can sell their interest in a Pacaso home at any time. And so far, of the people who have sold their Pacaso shares, they've benefited from about 10% capital appreciation during the whole period."

"In our case, it's about making better use of space, making better use of resources, contributing to communities and to the environment in positive and sustainable ways," the CEO continued. "And co-ownership is an incredible solution in a world where we need solutions to help with housing affordability, and environmental and community challenges that we face."

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