Purchasing a vacation home is an aspiration for many people. Whether you have your eye on a beautiful beachfront property or a home in the country, vacation homes can be very expensive. That’s why buying a vacation home with friends often becomes the most financially viable option for many people.
In this blog, we cover all you need to know about buying a vacation home with friends to help you make the right decision.
What Could Go Wrong?
On paper, buying a vacation home with friends sounds like a good idea.
Unfortunately, there are many things that could go wrong. For example, if a fallout occurs among the two parties or families, you may find yourself in a legal battle over the property.
That’s why it’s important to take the time to assess your relationship, your different needs and uses for the property and how these might change over time, as well as your rights and responsibilities as a co-owner.
This needs to be a careful, long-term decision. So, don't rush into it.
Are You Willing to Compromise?
Financially, splitting the purchase price between two friends or families feels like an appealing idea. However, sharing a property with another individual, who may have a different interior taste or lifestyle to you, means you have to be willing to compromise.
That’s why you need to agree on what you want before looking at properties and reach an understanding.
You’ll also need to discuss where you’d like to buy the property, as well as how and when you'll use the property. Will you both want to use it throughout the year, or would you prefer to turn it into a rental property? It’s vital you determine who gets to use it when and for how long, ahead of either party booking flights or transport to visit.
What Happens If Your Co-owner Wants Out?
Many people purchase a property with the intention of owning it forever. However, your co-owner may not feel the same. Before purchasing a vacation home with friends, it’s important to think about what happens if one of the buying parties decides they want out of the investment.
By having an upfront discussion about this, you can determine how long everyone intends to be on board and what will happen if one buying group wants to sell. This is essential to reducing conflict if the scenario occurs.
You’ll need to decide whether you’d be able to buy out a partner or have a way to cover the extra mortgage and maintenance costs if a party wants out.
Alongside deciding who gets to use the property and when, you also need to decide how the upkeep and maintenance will be organized. To keep the property conflict-free, you’ll need to agree on who’ll pay the expenses each month and how the maintenance will be done.
If a management company exists, then this won't be a problem for either you or your friends as they'd oversee all of the maintenance for you. Some management companies also operate a rental management service on behalf of owners too.
Why Buying a Vacation Home With Friends Is a Good Idea
Less Expense and Less Risk
A down payment on a vacation property is usually the most expensive upfront cost. However, when you’re purchasing a vacation home with friends, you’re dividing that expense between more people. This makes it a lesser expense with less risk attached.
At this point, you should also consider other expenses such as utilities, taxes, insurance and maintenance, as well as how the costs will be split between all partners. Ultimately, this will greatly reduce the cost of owning a vacation home and make it more affordable.
Easier Qualification for a Loan
Qualifying for a loan can be difficult, but it’s often required for purchasing a new property. As banks tend to have higher standards for second homes, it can be difficult to get approval. The good news is that splitting the responsibility among different people can make the process easier.
If you don’t have a great credit score, having another person involved can make a favorable outcome more likely.
When you own a home, it’s your responsibility to handle the upkeep. This is especially true when you own a property abroad in a resort community. Occasionally, you may need to deal with problems in person, which will cost you time and money. If there is a management company, there will be annual service charges and probably a reserve fund.
Through buying a vacation home with friends, you’ll split these expenses between several people. So, if an emergency does occur, there are multiple people to deal with it and the bill can be split.
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Why Make Bermuda Your Second Home?
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