Owning a second home might feel like a dream. Who wouldn’t want to have the luxury of a vacation home getaway? But the first thought might be: Is it affordable?
The good news is that it is totally doable with a little help from the family. Here are some considerations to keep in mind if you want to own a second home by partnering with those most dearest to you.
Everyone involved will have his or her own vision for how and when they will spend time at the home. Before you call dibs on the new family home for the first week of summer vacation, make sure to talk it out with the gang.
Clear up how the vacation home will be available to each person. Think about the holidays you will all want to share. Create a schedule where you can rotate time and holidays. Being on the same page about how and when the home will be occupied is key to everyone’s happiness and enjoyment of the new vacation home.
Renting it out
If you and your family do not plan on being at the home 100 percent of the time, then you got to think about renting it out.
Talk it out and see if everyone is warm to the idea. You can make the case that this is an opportunity to bring in cash and offset the costs of owning the second home. Everyone should agree on how the generated funds will be split among the owners and used toward the overall ownership costs.
Don’t forget to weigh the tax considerations, as well.
Sharing the cost
The biggest question is how the purchase of the second home impacts the family wallets.
A joint mortgage with family lessens the financial burden and can also improve the chances of getting approved for this investment of a lifetime.
A joint mortgage also translates into bigger buying power to find a home that checks every box. But, the financial details will need to be figured out before everyone plans a big party at the new home.
How will you split the mortgage? How will you pay for repairs and upgrades? What about taxes, insurance and the like? Figure it all out and consult with a financial expert. Once everyone is happy with the arrangement, put it down on paper with the aid of an attorney.
Selling the home
There may come a time when you’ll want to sell the home. That’s why it’s important to also discuss your exit strategy before even thinking about joining forces on buying a vacation home.
Consider how long you will want to invest in a second home, if it’ll be passed on to the next generation and other big questions before taking the leap. Other topics of discussion are: Will you be willing to sell a share to another family member? How many must agree before making a big financial decision? Can family members buy remaining shares of the home if someone leaves or passes on?
While it’s hard to think about, it’s important to talk about the possibility of a death occurring during ownership. It’s possible to divide the share equally among the other owners in the event of a death. Or, the share can be passed on to an heir in a tenant-in-common agreement.
As you can see, there are a lot of options and scenarios to ponder before buying a second home. Make sure all the big talks are happening and every rock is turned before agreeing to this once-in-a-lifetime chance of owning a vacation home with the people you love the most.