Do’s and Don’ts of Joint Ownership

Firstly what is Joint Ownership?

 

Vacation home joint ownership is a partnership in the ownership of (equity in) a house.

 

Typically the ownership is split between multiple vacation home investors, with the each investor/partner having equal shares or some combination of interest in the dwelling.

 

As with other shared-equity plans, the idea behind vacation home joint ownership is that it is a way for people to own vacation properties who otherwise would be unable to purchase a house without a large mortgage.

 

There are some basic common sense do’s and don’ts for joint ownership situations but also a few things you can only learn from experience.

 

Here are a few of the things you should consider prior to getting into a joint ownership situation such as;

 

1.   Can you play well with others, you will need some flexibility, patience and understanding, remember not everyone thinks and acts as you do, you will want to make sure that the partners either stay friends, family (although it is hard to remove family from ones life) or that they stay business partners,

 

2.   Can you live with structured occupancy of the vacation home as you will be sharing it with others,

 

3.   Can you operate on a budget, remember others will be sharing in the bills thus unbridled spending is probably not something that should be done by one or more partners,

 

4.   Can you be respectful of the other owners tastes and idiosyncrasies, see point 1,

 

5.   Can you afford the investment, remember that it is not only the up front acquisition price and costs but then the home has to be furnished and supplied, then there are monthly operating costs which are every increasing with the cost of energy,

 

6.   Unlike Canada, there are many transaction and closing costs associated with US real estate purchase,

 

7.   Tax, ownership and income issues need to be reviewed, we have found a new book that covers everything off, http://transitionfinancial.com/productcart/pc/viewPrd.asp?idcategory=&idproduct=1 ,

 

8.   Mortgages are available to Canadians but the costs rise accordingly, especially closing costs,

 

9.   Very tight user agreements need to be in place covering off guests, cleaning, repairs and a whole raft of other considerations,

 

10.  Very tight ownership agreements need to be in place covering off issues such as defaults (financial & usage), death, rights of passage, selling etc……

 

11.  Usage schedules need to be built which cover off the first 5 years of ownership so that there are no surprises or conflicts,

 

12.  Type and location of the proposed property, this is a detailed list which I will follow up on in another post,

 

Although some of the above can seem oppressive if you address everything up front and go into joint ownership with all the paperwork and agreements done up then everything seems to just fall into place.

 

In summary, do get all of the purchase, operating, usage and ownership agreements in place up front and don’t assume anything at all otherwise it will bite you in the ass sooner or later.

 

Until the next post,

 

cheers,

 

Michael

 

 

 

 

 

 

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