What You Need to Know Before You Buy a Vacation Home with Friends or Family

Maybe you’ve dreamed of vacationing with friends year-round, or of retiring to a new location with family. When considering a home purchase, combining financial power by buying together could sound like a solution, especially when house prices are high and competition is fierce.

“The main—really, only—benefit to pooling your purchase is that you can afford more than you might otherwise be able to alone or with just one couple,” says Mitch Mitchell, associate counsel in estate planning at Trust & Will, an estate planning company. “There are many more downsides.”

There’s a lot to consider when making any kind of investment deal with friends or family. These experts have some words of caution, should you decide to go in on a home with your best friend or sister. 

“Effective communication and meticulous planning are key,” says Steve Schwab, CEO and founder of Casago, a vacation home rental and property management company.

The Appeal of Buying a Property Together

It could be you always planned to retire somewhere warm, and you share that dream with your good friends and neighbors. Or perhaps you and your family frequently travel to a vacation town together where you typically rent a property. Whatever the case, cost is sometimes a barrier to those dreams, and that’s when going in on a property together might sound appealing. 

“Purchasing a vacation home with friends or family is beneficial when frequently visiting the same location and desiring a permanent holiday spot,” Schwab says. “This makes luxury properties more affordable, avoids the constant search for hotels or rentals, and allows for a shared, personalized space.”

Schwab says shared ownership has gained popularity over the years, especially as the housing market becomes more expensive. 

“It is seen as a practical solution to counter rising property prices and a competitive real estate market,” he says. “Pooling resources with friends or family makes owning a vacation home more affordable and offers access to prime locations and luxurious amenities. The social benefits and convenience of shared ownership contribute to its growing popularity.”

Scott Beaudry, broker/owner of Better Homes and Gardens Real Estate Universal in Las Vegas, Nevada, agrees. He says when you combine your resources you have access to a broader selection of properties that makes finding your dream vacation or rental property more feasible. 

“It raises the likelihood of finding a suitable home that accommodates everyone's requirements and desires,” he says. 

Plus, Beaudry points out that shopping with a partner can often ease the stress around home buying, and it makes for more connection once you’re living together. 

“Having trusted family or friends around you can provide emotional support and companionship, which can help create a sense of community within your home,” Beaudry says. 

And in some cases, you can sell the property down the road for a return on your investment for all involved.

Potential Pitfalls for Buying Together

As Mitchell points out, there are arguably more downsides than benefits to this kind of arrangement.

“What happens when the mortgage gets behind? What about taxes? What do you expect to happen when one of you wants to move or when one of you dies? Who is obligated for maintenance and insurance?” he says. All of these questions pose legitimate problems you may or may not have considered in the long run.

Beaudry summarizes the cons of the arrangement by saying there are financial risks, potential disagreements, and conflicts and legal complexities. 

“If you purchase a property with other people, you might not have full control over the decisions regarding the property. This means that if you want to sell the property or make significant changes, you will need to get approval from all of the co-owners,” he says. 

That goes for everything from having a leaky faucet fixed to deciding which tile to update your kitchen with. Decisions large and small can be complicated when you have to factor in the opinions of others.

Keep in mind, too, that you could have a perfect arrangement in place at first, but things could change. 

“Family or friendship dynamics can change over time due to marriage, children, job relocations, or other life events,” Beaudry says. “These changes may impact the living arrangements or the ability to maintain the property.”

Having Tough Conversations

If you’ve decided to go forward with this kind of joint purchase, there are some key conversations you should have beforehand. 

Namely, the experts suggest talking with a real estate attorney first. 

“By taking these steps and having open communication between all parties involved, you can ensure that purchasing a home together goes smoothly and creates an enjoyable living situation for everyone involved,” Beaudry says.

But after that, you’ll want to have some detailed conversations alongside the co-owners of your property. Discuss the location for where you’d like to buy. Get clear on your wish lists for the property and agree to stick to a budget. 

Also discuss what happens once you own the property. Who will stay there, and when? Are guests welcome? What about pets? Who will make the decorating decisions and who will pay for furniture? What kinds of personal items can be left at the property? Who is in charge of cleaning? 

“Assign duties such as paying bills, handling repairs, making mortgage payments, and even chores,” Beaudry says. “It’s important to set clear rules so everyone involved knows their individual roles and responsibilities.”

Consider too whether you will rent the vacation home out when you’re not using it. And who inherits your half of the property should you die? What happens when you decide the arrangement is no longer serving you or you can’t afford it? How can you each decide to back out of the agreement and make sure you are fairly compensated? 

If you’re purchasing a rental property with someone, decide how to split the share of the profits and the share of the responsibilities around booking the property, dealing with tenants, handling cleaning and maintenance requests, and other tasks. 

No matter what you decide, make sure your agreements are in writing.

“Creating a well-written legal agreement and understanding the risks involved can help reduce disadvantages and establish a strong basis for a prosperous co-ownership agreement,” Beaudry says. 

Protecting Yourself Legally

It’s difficult to imagine running into major legal problems with friends and family, but experts agree that expensive real estate investments are prime opportunities for disputes. That’s why it’s best to get things squared away before you buy, rather than banking on settling problems in the heat of battle. Consider these legal recommendations something like a prenuptial agreement. 

One option is to become “tenants in common,” where Mitchell explains that each party would own a fractional interest you could sell or encumber. In a situation like this, your half of the property would go to your heirs, not the other part owner of the property.

Another option, Mitchell suggests, is setting up an LLC with which to purchase the property. 

“You could also set up an LLC that will be the owner of the property and have the LLC company agreement set forth the rules for ownership and transfer or sale of ownership,” he says. “The LLC may not work if individual borrowers are responsible for the mortgage—it may trigger a due on-sale clause when the property is transferred to the LLC.”

Finally, he says you could enter into a contract with the co-owners that sets forth the expectations and responsibilities for the property, similar to the way a homeowners association or condo association might operate. 

Schwab says these kinds of co–ownership agreements are typically drafted by real estate attorneys. 

“It outlines each co-owners rights, responsibilities, and cost divisions, including mortgage, taxes, and maintenance,” he says. “It sets decision-making guidelines for property-related matters, outlines the process for selling shares, and defines usage schedules. This comprehensive agreement facilitates a harmonious shared ownership experience.”

This is just a broad overview of some solutions you could engineer in this kind of arrangement. The point is, you’ll want to involve lawyers and legal agreements in this scenario—not just brokers, lenders, and real estate agents. 

“Co-owning a vacation home requires thoughtful consideration. Prioritize open communication, and discuss financial commitments, property usage, and long-term plans,” Schwab says. “Get professional legal advice to draft a comprehensive co-ownership agreement. Put all agreements and changes in writing to avoid disputes. Plan for potential challenges and include solutions in the agreement. Approach the process with patience, respect, and cooperation.”