2nd homes on group purchases
Protect Yourself in a Second Home Group Purchase
Get everything in writing with a partnership agreement.
Run the agreement past a real estate attorney.
Making the partnership “official” protects everyone and prevents future trouble.
Did you know?
A group purchase can be a good way to buy a vacation second home.
Often second homes are bought as a group purchase with multiple parties owning part of the property. This method of buying a second home is particularly attractive for vacation second homes where each member in the group expects to get some use of the property, and the rest of time the second home will be rented out to generate income for the entire group. This is a great way to get into the real estate business, but it’s important for each party in the group to be protected. The best way to accomplish this is through a partnership agreement, or even a limited liability company (LLC).
Get it in Writing
The easiest way to make sure everyone is protected in a group purchase is to enter into a formal partnership. This way the financial and management details for the second home are down in writing and the group as a whole is protected from any problems such as divorce, bankruptcy or death of any member in the group. Any partnership agreement should be run past a real estate attorney to make sure everyone’s interests are fairly represented.
Things to Consider
Before putting the partnership agreement together the group should determine how much money each member is contributing to the purchase, how the mortgage and utilities will be paid, how will repairs be handled, and how the profits will be distributed.
Other considerations include:
How will the property be managed?
If a management company is employed, who will represent the group when dealing with the company?
How will the group handle the death of a member? An incapacitating illness? A divorce?
If the property is sold how will the profit, or loss, be divided among the members?
A solid and binding partnership agreement will make the group purchase much smoother and help head off future problems that might crop up during joint ownership.