With travel restrictions and social distancing in place, many of you are getting a bit restless and are looking at maybe buying a vacation property to enjoy. Since finances might also be a bit tight, going in partnership with friends or family members might seem like a good idea . . . . but is it? You do run the risk of creating more stress than enjoyment, but here are a few tips to help ensure everyone stays happy.
- Decide the ownership split. What percentage will each party own?
- Discuss what happens if a parent passes away. Will their share go to their family members? Which you may or may not want to be in partnership with, or will their share be divided equally among the remaining partners? If so, at what price?
- Agree upon usage: how many weeks/months per year does each partner have access? Can they rent their time out if they are not going to personally use it? Predetermine how the assignment of days/weeks/months will be handled to avoid future conflicts.
- Decide how expenses will get paid. Will the percentage split be the same as ownership or is it based on usage? How should you handle voluntary expenses like improvements versus basic expenses like property taxes and utilities?
- Confirm how you will handle work that needs to be done. For example lawn mowing, cleaning, repair & maintenance. Will you distribute tasks equitably or hire someone to do the work and split the cost?
- Exit Strategy – what happens if the partnership isn’t working as planned? Do all parties agree to sell or is there an option for one person to buy from the other? What if one party wants to sell but the other party doesn’t?
Establishing a partnership agreement before buying a property will help pave the way for a lasting relationship. If done right with the right people, this can be a fantastic experience and an opportunity to build memories that last a lifetime.