If you frequently vacation with good friends or family, it may have occurred to you that owning a vacation home together might represent an opportunity to lock in your favorite getaway forever.

With home prices in the stratosphere and stubbornly high interest rates, pooling your financial resources might be a great way to lower the cost of vacation home ownership. If done correctly, it could turn out to be not only a great investment, but a legacy of enjoyment for generations to come.

But, like any sort of home ownership, there are considerations beyond just the initial appeal. With someone else’s name on the deed, too, there are even more things to think about.

So, is it a good idea to split your favorite weekend abode with your friends and family?

Rewards and Risks

As you and your friends begin to seriously entertain the thought of buying, the first thing to ask yourselves is: “What will we get out of this, and what happens if it doesn’t work out like we thought it would?”

This is often referred to as a “risk-benefit analysis,” and it’s a simple, handy way of offsetting the excitement of a sentimental opportunity with some rational considerations. It can be as easy as drawing a line down the middle of a notebook page and listing the benefits on one side with the risks on the other — keeping in mind that a risk can be any kind of undesirable outcome, big or small.

Rewards

Here are some potential benefits to group ownership:

Convenience. Is the destination home close enough to everyone to make it worthwhile?

Accessibility. Is it easy to get to without specialized equipment or arrangements?

Bigger and better. Will you all be able to afford more space, a superior location and better amenities by grouping together?

Good investment. Will you all be able to secure a better investment by sharing the costs?

Share the load. Will there be practical benefits realized by working together as a team to lighten the load on any individual?

Risks

On the other hand, here are some risks that should be considered:

Commitment. Is there a risk that the level of individual commitment for any participant will become unsustainable?

Conflicts. Is there a chance that unforeseen conflicts could impair the nature of the friendship and therefore co-ownership of the property?

Costs. Can the costs be understood well enough in advance that no ugly surprises occur?

Complexity. Is it possible that personal or professional legal intricacies could break the deal after time and money has been invested?

Utilization. Is it possible that the property will become underutilized to the point that the group begins to regret the decision?

Once this initial conversation occurs, determine if the benefits outweigh the risks. If not, then joint ownership is probably not for you. If so, you can start figuring out how to make it happen by drafting a plan.

A Solid Plan

A solid plan is vital to the success of your new hideout. Remember: nothing’s more important than the people you care about, and a badly thought-out plan can turn your dream getaway into a nightmare for you and your pals.

While planning can be challenging (especially if you don’t typically do much of it), it can be streamlined.

Start with another document and get everyone involved to list everything that would need to be done — both upfront (before and during the purchase) and also on an ongoing basis. Then, on separate pages, address each item from your list by having a group discussion where everyone is encouraged to voice their opinions and ideas. At the bottom of each item page, write down a proposed solution that everyone can agree on.

Some things to include in your master planning list could include:

Cost splitting. Will individual contributions vary based on usage? Will all expenditures be tracked and accrued toward contributions, and if so, how? Will there be monthly contributions?

Scheduling. How will scheduling be conducted, and on what platform (e.g. Google Calendar? Will participants be afforded priority scheduling for any reason, and if so, by what means?

Maintenance responsibilities. What gets done collectively? What gets done by a third party, and how is that third party selected?

Management tasks. Who will handle paying the mortgage, the utilities, the taxes, the rubbish removal, etc.?

Ownership, transferal, and sales agreements. How will changes in ownership be handled? Can participants sell or bequeath their shares?

Group decisions. Will the group vote on decisions, and if so, how will ties or deadlocks be broken?

Conflict resolution. When two or more participants are in conflict, what mechanisms will be used to resolve it?

Usage rules. Will pets be allowed, and if so, any kinds? Will personal equipment (e.g. motorbikes, snowmobiles) be kept on the premises, and will they be usable by all? Will children have designated rooms? Will there be private storage?

Amendments. By what mechanism can established rules be changed or done away with?

Protection: Covering All the Bases

Once you’ve got a plan that everyone can agree on, it’s time to talk about how you’ll make sure everyone is protected.

One of the best ways to make sure everyone’s interests are properly tended is with competent legal advice. A good attorney can help guide you to a formal and reliable operating structure — one as simple as a written contract or as elaborate as an LLC in which everyone owns a share. When nothing is left to chance, and everything is clear to the stakeholders, the odds of a conflict drop dramatically.

Another way of protecting your collective interests is with great insurance. Mishaps occur even when everyone is being cautious and diligent, so making sure that everyone’s investment is properly insured allows everyone the peace of mind to relax and enjoy their getaway! Consider guaranteed replacement cost insurance so that, in the event of a catastrophe, you and your buddies will be back around the fire pit in a jiffy.

Talk to a local Whitbeck Insurance agent who will help you all understand what policies will work best for your ventures and adventures — not just for the home, but for the toys, too!

ERIE® insurance products and services are provided by one or more of the following insurers: Whitbeck Insurance Exchange, Whitbeck Insurance Company, Whitbeck Insurance Property & Casualty Company, Flagship City Insurance Company and Erie Family Life Insurance Company (home offices: Erie, Pennsylvania) or Whitbeck Insurance Company of New York (home office: Rochester, New York).  The companies within the Whitbeck Insurance Group are not licensed to operate in all states. Refer to the company licensure and states of operation information.

The insurance products and rates, if applicable, described in this blog are in effect as of July 2022 and may be changed at any time. 

Insurance products are subject to terms, conditions and exclusions not described in this blog. The policy contains the specific details of the coverages, terms, conditions and exclusions. 

The insurance products and services described in this blog are not offered in all states.  ERIE life insurance and annuity products are not available in New York.  ERIE Medicare supplement products are not available in the District of Columbia or New York.  ERIE long term care products are not available in the District of Columbia and New York. 

Eligibility will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time.

Whitbeck Insurance Agency can offer you practical guidance and answer questions you may have before you buy.