Thinking about buying a house with a friend? You’re not alone. Buying a home with a friend can seem like a great way to tackle the high costs of homeownership in Canada.
It allows you to share expenses, enjoy a bigger space, and possibly afford a better property than you could on your own.
However, it’s a big financial commitment and can strain even the closest friendships if not done correctly.
This guide explores everything you need to know about buying a home with tenants in Canada. No fluff, just the facts to help you make the best decision.
Why Canadians Are Buying Homes With Friends?
The Rising Cost Solution
In 2025, the average home price in Toronto is around $1.2 million. For many, buying a house with a friend is a practical way to make homeownership more affordable.
However, buying a home with tenants is also a great alternative. Renting out part of your property to tenants can offset mortgage payments and make owning a home more manageable financially. This is especially true in cities where rental demand is high.
Emotional Benefits
Buying a house with a friend also has emotional perks. Shared maintenance costs make it cheaper for both of you, and having a built-in roommate means you’re living with someone you trust. Unlike living with strangers, you’re sharing your space with someone you already know well.
However, just because it seems easy doesn’t mean it’s without its challenges. Be prepared to set clear expectations and lay a strong foundation to keep the arrangement running smoothly.
If you’re planning, exploring the advantages of purchasing a pre-sale home can help you secure a better price, customize features, and enjoy more flexibility before moving in.
The 5 Legal Risks of Co-Owning in Canada
Co-owning a property with a friend can be rewarding, but it comes with legal risks that can impact both of you. It’s important to understand these risks and have a co-ownership agreement in place to protect yourself.
1. Joint Tenancy vs. Tenancy-in-Common
The first decision you’ll face is whether to buy the house under joint tenancy or tenancy-in-common.
- Joint Tenancy means that both of you share equal ownership, and if one of you dies, the surviving owner automatically inherits the property.
- Tenancy-in-Common means that you both own specified shares of the property, which can be unequal. If one of you passes away or moves out, your share can be transferred or sold. This option offers more flexibility but requires more detailed planning.
Provincial laws vary—Ontario and Alberta have different rules regarding these forms of ownership, so it’s essential to research your specific province.
Before choosing a shared property, it’s essential to understand is rooming houses are legal across Toronto. Recent changes in zoning laws could impact your long-term co-ownership or investment strategy.
2. Mortgage Liability
Here’s something many people overlook: when you apply for a mortgage together, the bank holds both of you fully responsible for the loan, not just half. If one person stops paying their share, the other is on the hook for 100% of the mortgage.
It’s also important to remember that buying a home with tenants comes with different mortgage rules. When you rent out part of your property, your mortgage lender may require different terms.
3. Credit Impacts
Your credit scores matter when co-owning a home. If one person has poor credit, it could affect the mortgage terms or even prevent you from getting approved. The bank will assess the combined credit score of everyone involved, and a lower score could mean higher interest rates or loan denial.
4. Exit Strategy
What happens if one of you wants to sell or move out? This is where having an exit strategy is crucial. Will the other person buy them out, or will you sell the house and split the profits?
A well-drafted exit strategy protects both parties and helps avoid confusion or disputes when someone wants out of the agreement.
5. Dispute Resolution
Disagreements are inevitable in any shared living situation. Whether it’s about maintenance costs, renovations, or how to handle the property’s sale, a solid dispute resolution process can help avoid major conflict. Discuss these things upfront and include them in your legal agreement to ensure smooth decision-making when issues arise.
Smart Alternatives to Buying With Friends
Not sure if buying a house with a friend is the right move for you? Here are some smarter alternatives that can also help ease the financial burden of homeownership.
Option 1: Rent-to-Own With Tenants
Rent-to-own is a popular option for people looking to buy a property and share it with tenants. You can purchase a home and then rent out a portion to tenants, using that rental income to cover your mortgage.
In Canada, tenancy laws allow for this kind of arrangement, and it’s a great way to build equity while making your home more affordable. Plus, buying a house with tenants doesn’t come with the same risks as co-owning with friends, since you’re the sole owner and not tied to someone else’s financial situation.
Option 2: Multi-Unit Investment
If you want to still co-own but reduce your risks, consider investing in a multi-unit property like a duplex. This lets you live in one unit while renting out the others, creating a steady stream of income.
In cities like Vancouver, about 23% of co-owners opt for multi-unit investments because they provide a balance between affordability and income generation. You still get the benefits of co-ownership but with more independence and financial security.
With the new listings rise in Toronto, there are way more options to explore. It’s a great time to find a property that fits your needs and budget.
What You Should Know Before You Start Shopping for a Home?
Buying a home is exciting, but it’s a big decision. Before you start browsing houses online or going to open houses, here are some important things to know:
1. Know How Much You Can Afford
- Set a budget before you start looking.
- Think about how much you can pay every month.
- Don’t forget costs like the down payment, taxes, and repairs.
2. Check Your Credit Score
- Your credit score affects the kind of loan you can get.
- A better score = lower interest rates.
- Check your score early so you have time to improve it if needed.
3. Get Pre-Approved for a Mortgage
- A bank tells you how much it can lend you.
- It helps you know your price range.
- Sellers will take you more seriously.
4. Make a List: Needs vs. Wants
- Decide what you need (like two bedrooms, near school).
- Then, list your wants (like a big backyard or fancy kitchen).
- Focus on needs first.
5. Learn About the Local Market
- Prices and availability change by area.
- Some places are cheaper or more competitive.
- Talk to a local real estate agent to understand what’s happening near you.
6. Pick the Right Type of Home
Detached house = more space, more maintenance.
- Condo = less work, but monthly fees.
- Townhouse = middle option.
- Choose what fits your lifestyle.
7. Remember Ongoing Costs
Owning a home comes with bills like:
- Property tax
- Utilities
- Repairs
- Insurance
Be ready for these costs every month.
8. Work With a Real Estate Agent
- A good agent helps you find homes and makes the process easier.
- They can answer your questions and help you avoid mistakes.
- Choose someone who listens to your needs.
It’s smart to team up with experienced agents when buying a house with a friend. They’ll help you navigate the process smoothly, handle the paperwork. Also, they ensure everything goes as planned.
9. Understand the Paperwork
- Buying a home comes with a lot of documents.
- Don’t rush. Ask questions.
- If you’re unsure, ask a real estate lawyer or your agent.
10. Be Patient
- You may not find the perfect home right away.
- That’s okay — take your time.
- Don’t feel pressured to buy fast. Wait for the right fit.
Conclusion
Buying a house with a friend can work, but it requires clear planning, communication, and legal safeguards.
However, for lower risk, consider buying a home with tenants instead. This strategy offers similar financial benefits without the complexities of co-owning with a friend.
Before making any decisions, consult a Canadian real estate lawyer to ensure you understand the legal implications of your arrangement. They can help you navigate everything from mortgages to tenancy laws.
Ready to take the next step? Whether you’re considering co-owning with a friend or exploring tenant-based options, we’re here to help guide you. Contact Canada’s best real estate brokerage to start your homeownership journey.
