Should you buy a home with strangers? New options are cropping up, but there are risks.

Friends are fun to hang out with, but is it smart to buy a house with them? What about complete strangers?

Part of a decades-old homeownership model is making a comeback, aiming to help both first-time and second-home buyers in response to an expensive U.S. housing market.

It’s called fractional or co-homeownership, an arrangement that essentially divides a home’s equity and cost among multiple people. More buyers are looking to co-own a residence with friends, family, or someone they don't know at a time when the median price of an existing single-family home is at a historic high of $406,100, according to National Assocation of Realtors data.

The situation can work out, as long as everyone gets along, but there are risks beyond that, making it all harder said than done, according to industry professionals.

Several co-ownership startups — some backed by recognizable names such as ride-hailing giant Uber — are using the fractional model to make the benefits of real estate investment more attainable. They assist consumers with first homes to live in full time as well as luxury vacation property. Some clients just want to buy and collect passive income.

In one of the latest high-profile examples of fractional homeownership taking root, the buyer of NBA legend Michael Jordan’s former Highland Park, Illinois, estate last month announced an opportunity for additional owners, starting at $1 million, to bid on reserving stays of one week annually.

Sharing a property for an agreed-upon duration might conjure up thoughts about timeshares, the notoriously difficult-to-escape vacation home model first popularized in the 1970s. But timeshares were most often known to only offer the time rather than equity, or true ownership.

Homebuyers who complete a fractional purchase today don't have to worry about timeshares, according to attorney Junilla Sledziewski of Kershner Sledziewski Law. “They do have full 100% ownership of the property.”

The Jordan estate, now called Champions Point, is said to be a fractional investment, not a timeshare.

Lawyers and agents tend to advise against friends co-owning property.

“I’ve sold more real estate than anybody for a long time now in Chicago units-wise, and I’ve seen more friends buy places that ruin friendships than friends buying places and it goes well,” said Chicago-based agent Matt Laricy of Americorp Real Estate.

Maintaining relationships is not the only potential pitfall. It can be difficult to sell a fraction at times.

But Austin, Texas, residents and friends Alexandra Reyna and Amber Conway made it work. Co-ownership seemed like the only way to afford property in a city where the median single-family home price is about $600,000.

“I don’t see how people will do it otherwise, especially in Austin,” said Reyna.

Reyna, 36, and Conway, 37, were friends for about a year before going in on a $399,000 three-bedroom, two-bath single-family home in Austin last May.

Despite any potential emotional impact, co-ownership is a growing consideration for young people wanting to buy a home — most commonly done by married couples, according to the National Association of Realtors.

There are a few ways single, nonmarried buyers can enter into a fractional arrangement.

Purchasing a property through a limited liability corporation is the smartest approach with the least risk, according to attorney Thomas Croessmann of Croessmann & Westberg. The LLC splits shares of equity among co-owners, allowing for easier buying and selling. However, there can be limitations on the types of loans available, such as no ability to tap into first-time buyer assistance.

“It allows you to swap in and out owners without having to re-deed the property,” Croessmann said. “You won’t have to deal with real estate transfer taxes; you just sell the shares to the new owner.”

Another deal structure, known as tenants in common, grants multiple names on a property title with varying percentages of ownership. That percentage is dependent on a variety of factors, such as someone providing a greater down payment or another person bringing in property management or construction expertise. The risk here is what happens when someone wants to sell or can’t make loan payments.

A third arrangement — joint tenants with rights of survivorship — outlines that if one partner dies, the other members of the group inherit their ownership.

The scenarios have been around for centuries, according to Croessmann, but what hasn't changed is the risk potential that comes with co-owning. "With any co-ownership where people are not married, you run the risk of some type of abuse," said Croessmann.

Complications can be costly and time consuming, leading to outcomes such as a court-ordered sale if parties can't agree or buy out a co-owner, he said.

Some startups think they've found a streamlined solution, playing off demand for timeshares — sales volume increased from $8.1 billion in 2021 to $10.6 billion in 2023, according to the American Resort Development Association — but with a more flexible co-ownership model.

Reimagining the timeshare vacation home became popularized by Pacaso, a full-service marketplace offering fractional homeownership opportunities for second homes throughout the United States and Europe.

“There’s a lot of companies that are trying to mimic Pacaso,” said Laricy, who worked with now-closed Chicago-based fractional homeownership startup Vinci Life. “This is becoming a big thing because of Pacaso’s success.”

Real estate entrepreneur Austin Allison established Pacaso in October 2020. The firm quickly rose to unicorn status with a $1 billion valuation just six months after launch.

Allison chalks up the positive response in the market to timing and the housing shortage. With affordability and availability at a low, co-ownership creates a different way to maximize the existing housing stock without adding more inventory, he said.

“Society is more comfortable with sharing economy concepts today than they were 10 or 15 years ago, and that's because so many sharing economy companies have transformed the way that we live and work and travel,” said Allison, referring to Uber and Airbnb.

Pacaso began a wave of startups — including Ownify and Arrived — that all utilize variations of the co-ownership model.

Pacaso identifies properties for its marketplace, dividing the cost into shares, typically eight, that include designated time in the home. Allison says Pacaso’s approach to buying and tools that keep owners anonymous help remove friction associated with co-ownership. Homes come with a manager that act as a middle person between communications, such as voting for a change to the property, for example.

The company also offers financing options, and if a member defaults, Pacaso acts as the corporate guarantor of the loan, taking over and either resolving the issue or reselling the share.

Pacaso's model aims to control the uncontrollable in co-ownership situations, but with full power still in the hands of buyers and costs at the whim of the market, risk still remains.

"You're going to go with eight random people, and at some point, somebody is going to want out. The market will go down, they won't be able to get what they want — they want their investment back," said Laricy. "It's going to be terrible. It's a recipe for disaster."

Based on listings though, the relative affordability of co-ownership stands out as a lure for buyers. For example, a 3,614-square foot, five-bed, six-bath home in Miami Beach, Florida, on Di Lido Island with a lap pool and high-end finishes is listed for $699,000 by Pacaso for one-eighth ownership, compared to neighboring properties ranging from $10 million to $33 million, according to Homes.com.

San Francisco-based startup Ownify approaches co-ownership differently from market-dominating Pacaso. The startup purchases homes and uses an LLC to divide equity between a first-time homebuyer and a group of investors. It launched in 2022 and began selling in the fall of 2024.

Through the Ownify model, buyers supply a 2% down payment that purchases a small portion of shares. Their set monthly payments go toward more shares and rent on the unowned portion. After the program’s five years, these homeowners will have enough equity to sell their shares and fund the purchase of a new home — one without co-owners.

“It’s an equity-based path to ownership rather than a debt-based path,” said CEO Frank Rohde. “You’re always renting a fraction and owning a fraction.”

Ownify has a portfolio of 15 homes across the Raleigh-Durham metropolitan area in North Carolina; Nashville, Tennessee; and Dallas but plans for 200 homes by the end of 2025, said Rohde. The company purchases single-family properties priced between $300,000 to $500,000 in cash.

Most of Ownify’s homeowners cite student loan payments as barriers to homeownership, Rohde said. The target first-time buyer for Ownify is someone in their late 20s to early 30s with income 100-120% above the area median income and an average credit score of 725. The challenge for these buyers is saving for the down payment.

“The reason they haven’t saved for the down payment is largely student debt,” said Rohde. “The average customer in our portfolio has about $60,000 in student loans. … It’s this combination of house prices, mortgage rates, and affordability, combined with student debt dragging people down and preventing their ability to save for the down payment.”

Arrived is a startup that launched in 2020 and is backed by billionaire and Amazon founder Jeff Bezos, Uber CEO Dara Khosrowshahi, and Salesforce CEO Marc Benioff. Its model uses fractional homeownership to split equity on long and short-term rentals among investors for the strictly financial gain of property ownership.

According to its website, Arrived has more than 400 properties in 63 U.S. markets. Investors can invest in individual homes, a pre-determined portfolio of properties, or the Arrived Private Credit Fund, which funds short-term loans for projects managed by real estate professionals, such as remodels or new home construction.

The company claims to analyze each property before purchasing to ensure its investment potential. Investments begin at $100 for 10 shares, but Arrived allows up to $20,000 investment on an individual home.

In Austin, Reyna and Conway (who were featured on an episode of "House Hunters" for their unique arrangement) agreed their house would not be their forever home, but it was a means for both to build wealth. They eventually added an internal wall, splitting the home and renting Reyna’s half on Airbnb while Conway lives in the other half.

The Texas pair worked with Open House Austin, a real estate brokerage focused on making homeownership accessible. And that often means co-ownership. Open House Austin agent Sydney Schuster, who co-owns property herself, says she hasn’t experienced detriment to partnerships.

“What a lot of our clients do is have a separate operating agreement outside of the sales contract that draws out what [co-ownership] looks like,” she said. “If someone’s plans change or change in circumstance, you go back to the documents.”

Those agreements, written by a lawyer, outline the exit strategy, property management, taxes, selling, and decision-making. Still, it’s just a contract, said attorney Croessmann, and depending on the state, it may not be fillable with land records, or a will may overpower the contract.

Open House Austin reported that 13% of its home sales in 2024 were co-ownership purchases among nonromantic partners, and the majority of the brokerage’s buyers are first-time homeowners.

A 2024 survey of 1,004 Americans from JW Surety Bonds found 48% would consider co-purchasing a home with nonromantic partners. Most respondents were millennials, born between 1981 and 1996. Fifteen percent of respondents had, in fact, purchased a home with a nonromantic partner.

"It comes down to trust," Reyna said. "We both trust that we're not going to do anything to put the other in a bad position."