Expert: Sue Bernstein - 8/28/2006

Question
My best friend and I bought a duplex for $400,000. She occupied one unit(A) while I lived in the other(B). Although the lay-out of each of the units are almost similar, there are some differences that make A “better” than B. For example, bathroom, appliances and kitchen of “A” although not brand new are more up to date than “B”. It also has a deck and has hardwood floors (maybe 10 years old) on the second floor. There is a common driveway found on side B and the sump pump is also in basement B.  The previous owner gave an estimate of $20,000 cost of updates on unit A. We cannot rely on this estimate nor did we have separate appraisals for each unit before we purchased it and did some remodeling ourselves. We are thinking of splitting the monthly mortgage payment 50-50 anyway. I already did some updating on my side (B), which I know is also an investment on my part.  They have plans of finishing the basement and who knows what our plans will be later. I have a couple of people comment on this agreement. My question is, can you please give us some suggestions/options on how to spilt the amortization, repair and maintenance expenses, as well as profits in the future sale of this house?

Answer
Dear Red,

This is less a real estate question than an agreement of whatever you and your friend decide.
If you were not going to share everything equally it should have been worked out when you first purchased the property and entered into the agreement.  I can only suggest what I would do if I were in your position. Without having made any kind of agreement other than splitting it down the middle that is what should be the agreement now.  But that includes splitting all upgrades to the property including the upgrading you did to your side.  With this in mind it makes sense splitting the profits when you sell.  If you are each going to deduct separately your contributions to the upgrade and maintenance it is a little stickier with no prior agreement.
I would suggest you sit down with your friend and discuss these concerns as to what percentage you each want to contribute because that will tell you percentage you will get when you sell.
I hope this helps and good luck.

Sue Bernstein