Buying a Vacation Home with Friends: 4 Things to Know Before You Buy
There’s no denying the appeal of having your very own luxury ski condo or beach house waiting for you whenever you want a weekend getaway. However, real estate in these premium locations comes at premium prices, and many simply can’t afford the extra mortgage.
What many second homebuyers are discovering is that many hands make light work.
Going in together on buying a vacation property with friends is an increasingly popular way to overcome the financial barriers to entry and reap the benefits. But it’s important to carefully consider whether this solution is right for you. Although co-owning a vacation home with friends or family can be a great way to split the cost for everyone, there are some potential drawbacks. Let’s go over some of the pros and cons so you can go in with your eyes open and have a successful co-ownership experience.
Why Buy a Vacation Home with Friends?
The primary reason to buy a home with friends is that together you can afford a more expensive property than you could purchase alone.
Sharing the cost of a vacation home with friends increases your buying power and makes the vacation home market more accessible to more buyers. In areas where vacation homes are popular, such as ski areas, the cost of real estate can be prohibitive for individuals. With friends, you can split the cost and get more bang for your buck.
Joint ownership will also divide the responsibility for upkeep and management. Much like splitting the chores in a shared apartment, you can divide and conquer, making it far easier to take care of your vacation home when you’re away.
Owning a home with a friend can also be more appealing than fractional ownership with strangers. Because you share ownership, you’ll have more opportunities to spend time with your friends or family than you might otherwise. Having a vacation home with friends can give you the chance to bond and create memories that will last a lifetime. If you have a larger group of friends, you can split the cost even further and still get the same amount of enjoyment out of the home.
Many co-owners also report that co-ownership alleviates fear or guilt of their second home “going to waste” if they don’t use it enough and makes the ownership experience more enjoyable overall.
Overall, buying a vacation home with a friend can be a great way to share the cost and the responsibility of ownership while retaining all the benefits of your chosen getaway.
Disadvantages of Co-Owning a House
One of the most frequent pieces of cautionary advice co-owners get is that it will put a strain on your relationship. It doesn’t always, but it can, so it’s vital to choose your co-owners wisely. Buying a vacation home can be complicated enough without adding more people to the mix.
When you buy a vacation home with friends, you’re held responsible for all financial and legal aspects of the house—regardless of what your co-owners do. For example, all parties have their credit reports attached to the mortgage of a co-owned house. If things go south for one party, you could have difficulty acquiring loans in the future, even if you made your own part of the payment on time.
And if one of you wants out, the remaining co-owners are on the hook for making payments regardless. This can get especially sticky if you don’t have the financial resources to “buy out” the absent partner and make payments on an expensive property by yourself.
Additionally, all co-owners must be willing to cede some control of decision-making every step of the way, from selecting a property to choosing furnishings. Compromise is essential to successful co-ownership, and some potential partners just aren’t great partners for this.
Buying a vacation home with friends can be a great way to make memories and save money, but it's important to consider the potential pitfalls before signing on the dotted line.
Planning Ahead is Essential
Communication is vital to any successful relationship, and owning a house with a friend is no different. There are several key factors to hash out before you go into this venture:
- Whether you’re on the same page about what co-ownership will look like
- Who gets to use the property when, and how this will be decided
- Whether you'll rent the property out when not in use
- Who pays for what, who gets tax write-offs, and other financial considerations
- What your exit strategy is in case someone wants out down the line
It’s helpful to have each party be clear about what they expect to get out of owning the vacation house. If one party is expecting to use the property frequently and doesn’t want the responsibility of rental management, while another is expecting to be able to acquire some passive income, it’s important to discuss whether you’re looking for a vacation home vs. investment property beforehand. Discussing these matters in advance will help ensure that everyone is happy with the outcome.
Tips for Successfully Co-Owning a House
Many partners have success with treating co-ownership like a business relationship. Having a written agreement outlining the responsibilities and code of conduct of each party is helpful for many, as it can help prevent potential disputes down the line.
Additionally, establishing a joint bank account to cover maintenance and repairs can help alleviate the burden from any one person. Just like an HOA, if everyone regularly contributes to a reserve fund, there’s no need to argue over who pays an emergency bill.
On the other hand, while more formal arrangements are useful, sometimes co-owners who are also friends find success in simply working out disagreements casually. If you have a system that works, founded on a long friendship, there’s no need to invite disputes by going into minutiae. Each set of co-owners is different from the next—what works for one won’t work for all.
It can be beneficial to do a “trial run” before committing to buying a house together. Consider renting rather than buying for a while as you figure out whether you and your friends would make good co-owners. (Just don’t wait too long—vacation homes are a great investment and the sooner you buy, the sooner you can benefit from the rewards!)
By taking these steps, co-owners can help ensure their vacation home investment is a positive experience.
Is Co-Owning a Vacation Home Right for You?
Buying a vacation home with friends can be a great way to make a large purchase affordable and more enjoyable. It can also be a great way to build relationships and create lasting memories. While there are some pitfalls to be aware of when co-owning a house, with careful consideration of everyone's wants and needs and a well thought-out plan, it can be a successful venture. Don't let the potential of disputes or disagreements get in the way; with the right attitude and approach, this could be the best decision you ever make.
Breckenridge Vacation Home Resources
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- How to Care For Your Vacation Home When You're Not There
- Complete Guide to Buying a Vacation Home
- Buying a Vacation Home with Friends: 4 Things to Know Before You Buy
- 5 Things to Know About Buying a Vacation Home in Colorado
- Vacation Home Tax Rules: Understanding 4 IRS Rules For Rental Properties
- How to Buy a Second Home: Everything to Know About Buying a Second Home
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