As we know, there's no investment without risk, and building a house with a friend comes with a slightly different risk than is typical for the property market. The risk involves the relationship and interpersonal dynamics between the co-owners. There's an old trope around mixing business and pleasure because business relationships require different demands and dynamics than the ones we have in our personal lives.
Property co-ownership can put friendships to the test, and it can mean both parties share the financial risk. You also might feel tested when deciding on the nitty-gritty details – who takes which room, who handles the maintenance processes, and will you split the bills in half? These are small details, and friends considering co-ownership should already be able to handle making agreements like these.
But buying a house with a friend is not strictly a business relationship. There are financial involvements and shared assets, but it's still a personal journey and commitment. You or your friend's dreams and plans can change. One of you could meet someone you'd like to build your new property with, or you might decide you no longer want to live together.
It can test your relationship, and if it develops into an unresolvable conflict, you can both be stuck in a financial situation that you want to get out of. If this happens, the solution is disruptive but not a significant problem. You can sell the asset, or one of you can buy the other one's share of the property and take full ownership.
These risks of building a house with a friend are not detrimental, so they don't make it a bad idea, but they're important to keep in mind so you know the possible outcomes.