Have you been fantasizing about that bungalow on the beach—even though you don’t have the cash or time to manage a second property?
It could be time to phone a friend.
As real estate prices rise and Americans face fewer vacation days and stagnant paychecks, more people are opting to share the burden of purchasing and maintaining a vacation home with friends and family, the Wall Street Journal reports.
The buddy system certainly has its advantages, like lower mortgage payments and maintenance costs—but it has many potential pitfalls as well. Bottom line: No matter how close you are to your co-owners, approach ownership like you would a business.
Start the conversation before even looking at listings together. Determine why each party is interested in a second house: is it to rent out for extra cash, to use for summer getaways or to visit on long weekends throughout the year? Be sure everyone’s on the same page.
And don’t wait until someone wants to back out to create an exit strategy. Try to estimate how long the group plans to keep the property, or at least decide on a timeline with planned evaluations of whether to keep or sell. If somebody does want out, giving the remaining owners the right of first refusal will allow them to approve of a new partner in advance—and lend some peace of mind, too.
Another important topic to discuss is maintenance, especially if the second home is hundreds of miles away from where you live. Rotate responsibilities so everyone participates equally—even with specific categories like finances and operations. Set up a shared bank account that everyone contributes to regularly and use it to cover expenses.
Once you’ve settled the above, you’re on track to buy the house. Now, the fun part: it’s time to decide who gets to use it—and when. Using online spreadsheets; designating a number of weeks per year each person can use the house; or allowing owners to trade or sell their time slots are all reasonable tracking systems. Even though it can be tempting to simply text your friend or sibling about an upcoming visit, in the long run, it’s a lot neater to treat the system like a business.