Buying a holiday house is for many one of their biggest dreams. But for some of us, finding that extra money to purchase a second property may just keep it as a day dream. However, there is a way to get around this. More and more buyers are choosing to pool funds with friends or family to go in together on the investment. But is this always the best option?
The attractions of this plan are obvious: split the deposit cost, the repayment amounts, and even the bills and rates. But there is more to consider when planning to purchase a little piece of paradise to share between friends.
Legalities of buying a holiday house
The first thing you should do when thinking of purchasing a shared property is speak to a solicitor. There are numerous legalities at play in property ownership, and it is best to have all of these ironed out before you sign on the dotted line. Although you may be purchasing with friends or family, it is important to treat it as a business arrangement, with all terms clearly stated and written down including distribution of bills, who can use the property and when, and who is responsible for maintenance. If all parties are not contributing evenly, you also need to consider proportion of rent if you are opening it up to tenants, and similarly how to split the profit if you do decide to sell the property.
What if one of the parties wants to buy out of the property before the others? It’s important to discuss this and plan a strategy for exit prior to purchasing the property. All owners need to be comfortable with the plan so as to avoid arguments and resentment if and when the time comes.
Even after purchasing, there are things to consider to keep the peace, such as housework. Will you provide a cleaning service and if so, who will pay for it? Consider a linen service that will pick up and replace sheets and towels at the end of each stay to avoid any tension between parties.
Consider opening a joint bank account between all parties that everyone can contribute agreed amounts to. This is a great idea to have as a backup for any emergency repairs, maintenance, or even bills. If you end up with more in the account than budgeted for, use it to throw yourselves a little party at the end of the year to celebrate holiday house ownership, or carry it forward to use on the next set of bills.
We can’t always get what we want
Compromise will be a major part of settling on a house that makes everyone happy. Again, it is best to have an in depth discussion in the early planning stages about what everyone wants from the place. This is not just in terms of what the house looks like but also how it will operate. Do some parties want to use it only for rental gain while others want to use it for their own enjoyment? Have these discussions early so that everyone is on the same page before you start to seriously consider investing.
It’s my turn
How will you determine who can use the house and when? Will each party be given the same amount of time to use? Who will get the house for Easter or Christmas? And school holidays? Without a strategy in place for occupancy, fights and resentment will break out quickly. Discuss with all parties how you will roster the home for use to avoid any uncomfortable situations – after all, you don’t want to argue with friends!
Buying a holiday house with friends can be a great way to get an extra foot in the market, but be sure you are well prepared for all of the finer details that come with joint ownership. With planning and careful consideration, you will be popping the champagne in celebration in no time!