Buying a vacation home with your family can be a great way to cut down on mortgage costs, and have a special getaway your family can enjoy for generations. Learn how to maintain family harmony while making the most of your investment.
There are many great reasons to buy a vacation property with your family. Sharing the costs, maintenance and overall responsibility for a home can make it easier to own your perfect U.S. retreat. Plus, it can become the special destination for family events and celebrations for years to come.
At the same time, family-owned property can get tricky if you don’t set some ground rules from the beginning. Here are some tips to avoid common pitfalls — and create a harmonious home-sharing situation that even your future great, great-grandkids may enjoy.
1. Be Ready to Compromise
From the location and type of property, to the design and finishes, everyone will have an opinion about what makes an ideal vacation home. Satisfying everyone’s wish list will be next to impossible, so the key going in has to be compromise. It’s a good idea for all family members to itemize their top one or two priorities (i.e., your “must-haves”) and go from there.
2. Make it Legal
While you may be envisioning an easy co-ownership situation, as families grow and evolve things may not always be as simple as they are now. Setting up your co-ownership in black and white at the beginning can help you avoid pitfalls later.
There are a few options when it comes to setting up a co-ownership agreement between non-married people, the most common being: Tenancy in Common (TIC) and a Limited Liability Corporation (LLC). An LLC requires a bit more upfront paperwork and cost, but may provide more protection for each owner.
Speak with a lawyer (as a family) to determine which option is best for you. Whichever way you go, think of it like the real estate version of a pre-nuptial agreement — it’s there to help things run smoothly, eliminate questions, and fend off potential resentments. Without something official in place, under-discussed issues — such as who takes care of window-cleaning or who cleans out the gutters — can quickly turn emotional.
3. Set a schedule
Who gets to use the property when may be one of the greatest challenges of co-ownership, and something best planned out in advance. School breaks, holidays and summer vacations will likely be the hot times for everyone, so finding a balance that’s fair and considerate will go a long way toward keeping the peace. In off-peak times, an online, shared calendar may help family members schedule visits with full transparency.
SharedKey and The Vacation Calendar are both options to let you schedule your time at the property, as well as add shopping lists, maintenance tasks, photos and updates.
4. Assign Tasks
Figuring out logistics goes hand in hand with co-owning a property. Who takes care of paying the mortgage? The homeowners association fees? Who manages the maintenance, pays the bills, and ensures the place is clean? Dividing up and assigning key tasks will help keep your home well-maintained and running smoothly. While you’re at it, determine how to deal with family members not holding up their side of the agreement.
5. Agree on an Exit Strategy
You may think you want your vacation home to stay in your immediate family for the next few generations, but as life changes and people develop new priorities, this might not be the case. So what happens if someone wants out? Figuring this out before you buy will help everyone involved.
6. Talk About the Tough Stuff
Death and divorce are two realities of family life. So determining what happens if one of the owners dies or splits with their spouse is a critical step to take early on.
7. Enjoy it!
There are plenty of potential pitfalls when it comes to co-owning property with family, but there are also wonderful opportunities for family bonding, long-term investment and a place to look forward to visiting throughout the year. While scheduling and maintenance can sometimes become a headache, be sure to make the most of your time away and enjoy your second family home.
RBC Bank is RBC Bank (Georgia), National Association (“RBC Bank”), a wholly owned U.S. banking subsidiary of Royal Bank of Canada, and is a member of the U.S. Federal Deposit Insurance Corporation (“FDIC”). U.S. deposit accounts are insured by the FDIC up to the maximum amount permissible by law. U.S. banking products and services are offered and provided by RBC Bank. Canadian banking products and services are offered and provided by Royal Bank of Canada. U.S. deposit accounts are not insured by the Canada Deposit Insurance Corporation (“CDIC”). RBC Bank, Equal Housing Lender.