WISCONSIN — Aidan Hill was living with a friend in Madison when he decided he’d had enough of the rental market.
While Wisconsin is still considered to be one of more affordable rental states, U.S. Census Bureau data shows rent still rose about 21.1% from 2017 to 2022. According to Zillow data, the median rent for all property types in the state so far in 2024 is $1,295.
“…I was just thinking too much about where all that money was going, and I didn’t like where it was going every time I thought about it,” he said. “I look at renting like throwing your money out the back door… you never see it again.”
That’s when Hill decided he wanted to buy a home. But amid a limited supply and rising costs, doing it alone would be a challenge.
So he and his friend decided to pool their money for a house down payment. For two years, the pair lived at home with their parents to save money.
When the time was right, they began their search.
“We went through a couple phases of duplexes or single family because that was the only thing available at the time and we were pretty antsy to get into it,” said Hill. “I think the Lord knew what he was doing and waited for us to find the right place, even if it took a little longer than we wanted it to.”
In 2021, at 20 years old, Hill and his friend purchased a home in Watertown. They rent out the top floor for extra income. It’s a decision Hill, who works in real estate, said he wouldn’t change.
Co-buying a home with a friend is a new trend that’s emerging with a difficult market for first-time buyers.
A study done earlier this year by real estate bond company JW Surety Bonds found that 15% of Americans have co-purchased a home with someone other than their romantic partner. Another nearly 50% would consider it.
The study also found that about one in four respondents who did co-purchase with a non-romantic partner said they would not have been able to afford it alone.
Affordability has become a challenge nationwide. In Wisconsin, the statewide median price of a home increased 8.3% from July 2023 to July 2024, jumping from $300,000 to $324,000, according to Wisconsin Realtors Association data. The Housing Affordability Index — which is the portion of median-priced homes that a qualified buyer with median family income can afford — fell 6.4% year over year for July.
This tracks with a report released by Wisconsin Policy Forum in March that found incomes did not keep pace with home prices.
Marquette University economics professor David Clark said this and other factors put first-time buyers in a bind.
“Their incomes have grown, but not as quickly as prices have grown and median and mortgage rates have grown. So that puts them at a little bit of a disadvantage,” he said.
Clark said co-buying a home, like Hill and his friend did, could allow younger generations to squeeze through these barriers and get into the market.
“The advantage of that is that doubles the income. You have two income earners who are contributing to a down payment and ongoing payments of the mortgage,” he said.
However, there are risks.
“First of all, it ties you financially and personally to another person, and so you better get along with that person,” Clark said.
He said it can also limit mobility.
“Let’s say that you bought a home with someone else, you get a job offer that will take you to another location. Now you’ve got to deal with preferences of two individuals,” he said. “Maybe the other person doesn’t want to sell the home, but ultimately, doesn’t have the financial resources to buy out the partner and so it can potentially make it more difficult to make that transition to another location.”
Hill said he and his friend have an owner agreement between them — but it wasn’t written down until a few months ago.
“We both have really, really wanted this for as long as we’ve really known each other," Hill said. "So the fact that we didn’t have that agreement in place didn’t scare me probably nearly as much as it should have because this was a guy who I had known since I was 13."
Toby Tully of Fidelity Land Title Ltd. said if you’re going the route of co-buying with a friend, having a legal arrangement in place as soon as possible is crucial. He said if things go south, this ensures there is a way for the co-buyers to handle it.
“In that case, they should really take title. It’s called 'tenants in common', so if one person left or whatever, that other person would get paid out, or if they died, it would go to their estate,” Tully said.
He also suggested talking to an attorney about the situation for any other legal advice during the process.
Hill said when he and his friend initially bought the home, they put it in their names, but have since put it under an LLC. It gives them the option to buy out if they wanted and also protects them from any issues with the upstairs tenants.
Clark said that this trend of co-buying is likely to die down as prices and mortgage rates eventually calm.
“This is likely to be a first-time buyer strategy, as opposed to one that persists over longer periods of time, and it’s a creative way to get around the affordability challenges that currently exist in this market,” he said.
It’s a strategy that worked for Hill.
For other first-time buyers, Hill recommends finding a lender and agent you trust.
“Those two things are really important because especially as a first-time homebuyer, it’s a lot of struggles, it’s a lot of rejection, it’s a lot of looking, it’s a lot of writing, and then a lot of no’s,” he said.
Now at a 23 years old, Hill can tell others he’s a homeowner. It’s something he said he’s proud of.
“Homeownership, to me, is just peace of mind and just a lot more freedom and flexibility to just do what you like to do,” he said.
“It’s definitely a cool feeling when I can tell people that, ‘Yeah, I’m a homeowner,’” Hill added.