It’s common for friends to come together and buy a vacation property. It allows them to spread the expenses, risks, and responsibilities of owning such a property. Buying any property involves a financial and legal commitment. And splitting that commitment among friends isn’t always a walk in the park. So, before you buy that vacation home with your loved ones, here are several things you should know.
Agree Who Pays for What
The first thing to discuss is how to split the purchase price and the ongoing costs like tax, insurance, utilities, and homeowners’ association fees. It’s possible that you all won’t have the same financial muscle to split these expenses evenly. If that’s the case, agree on how you will split various costs. In addition, decide who will be in charge of paying all ongoing costs.
Aside from payments, discuss how to run and manage the property. Will you be using it for short-term or long-term rentals? How will you manage the bookings? Who will be in charge of repairs and other issues? Will you hire a property management company to help you run it? These are important questions you must all agree on.
Be Ready to Compromise
When you team up with your friends to buy a vacation home, be ready to compromise. Your ideas for designing a vacation home will differ from your friend’s. You will also hold different opinions about location, the kind of home to buy, etc. It’s important to sit and negotiate these things while being ready to compromise.
In addition, discuss how to use the property. Do you plan to rent it out occasionally to generate income, or is it simply a vacation home for you and your friends? Have this conversation beforehand. You can even decide to do a trial run where you first rent a property together for a while. This will give you an idea of whether you make good co-owners.
Protect Yourselves Legally
You may assume that you and your friends will always agree on the same issues, so there’s little chance of facing legal problems. Unfortunately, anywhere a significant amount of cash is involved, there’s a high chance that a dispute will arise at some point. Square things away before buying the property. This is where you all consult with a real estate attorney, who can guide you on the legal aspects of owning a property as friends. They can help draw up a document outlining each co-owner’s responsibilities, rights, etc. This will prevent disputes.
When One Person Wants Out
Don’t assume all parties will want to own the vacation home for decades. Life happens, and situations may force one party to want to sell out. That’s why it’s important to discuss an exit contingency plan. This can be finding another third-party buyer to buy you out or the remaining parties to buy your share. Whatever you agree on, have a written agreement so that when that time ever comes, there won’t be disputes arising.
Is Co-Owning a Vacation Home the Right Move?
Buying a vacation home with friends is a great way to make a significant purchase more affordable and enjoyable. It can even strengthen your relationship and help you create more lasting memories. That said, without proper planning or discussing all the nuances of owning a vacation home, it’s easy for disputes to arise. As such, it’s important to have an honest conversation and involve experts, like real estate attorneys, to help you develop a good plan.
