Martin Schrimpff
CEO & Co-Founder
Startup Contributor

The Pros and Cons of Buying a House with Friends or Family

By Martin Schrimpff | Tue, 08/30/2022 - 10:00

As home prices soar and inventory remains low, many millennials are seeking alternative options to make homeownership possible. Fortunately, new models have begun to emerge that can empower younger buyers to own the home — or second home — of their dreams. One of those options is buying a home with a group of friends  or family through co-ownership, an opportunity with big potential upside, especially if you’re looking to own your first vacation home.

Co-ownership simply means that a property is owned by a group of multiple owners instead of one single entity. This is also known as fractional ownership, a concept and practice used to democratize access to otherwise unattainable assets.

When we hear “vacation house,” we generally think of a traditional single-ownership home. But traditional ownership, where one person or family unit owns the home outright, can be expensive, management can be time-consuming, and homes often sit unused for many months of the year, wasting earning potential. Co-owned homes offer the opportunity to tap into all the time and value the home has to offer and ensure you only pay for the time you spend in your home.

Pros of Co-ownership

The prospect of owning a home with a group of your closest pals or family members can inspire daydreams of big beautiful lake houses and lazy weekends spent poolside with the people you love. With co-ownership, that vision can actually come to fruition. Joint purchase of a home offers each owner the ability to buy a stake in a property they otherwise might never be able to afford, making the dream of second-homeownership a much more accessible reality for many.

Modern co-ownership can apply to almost any property, from a full-time home to a  part-time vacation home, and offers much more flexibility and freedom than a timeshare.

One of the biggest pros is the opportunity to get more home for your budget.

Co-ownership opens up a world of possibility. If your budget allows for, say, a small cottage in a remote area, you can pool resources with a group of other co-owners and  invest that same money in a beautiful luxury waterfront property. An upgraded house in a desirable area also means you’ll have more potential to rent out your house or sell your shares in the future and your investment will be more likely to grow over time.

Of course, that’s just one upside to co-ownership. Other pros include:

  • Combining purchase power to make a larger down payment (and with it, avoiding PMI, or Private Mortgage Insurance)
  • Spending more time with your with friends or family
  • Potential to build equity
  • Earn rental income from unused time at the property
  • Make a lifelong dream come true Cons of Co-ownership

While there are so many reasons to consider co-ownership with a group of loved ones, you’ll still want to carefully consider if shared ownership is right for you. There  are some specific emotional and logistical complexities that can result from sharing such a large asset among friends and you’ll want to ensure you think through them all.

Co-ownership does allow you the opportunity to rent out your house when not using it  for additional income but only as long as all the owners agree. If that is the case, you’ll need to be specific in how you will split rental income, manage the rental process, facilitate cleaning, and take care of guest amenities.

When it comes to sharing time, scheduling who uses the house and at what time of year can be a source of tension. You’ll want to be clear and upfront about how you want to approach scheduling within your group.

Even though owning a house with your friends might sound like a fun undertaking, you must be painstakingly clear on the terms and conditions, so if you don't form an LLC, you should have a lawyer draw up paperwork and an operating agreement for your group to avoid future discrepancies and establish ownership of responsibilities,   both financial and managerial, within the home. And if you do have an LLC, you must   know how to keep it up-to-date.

At Kocomo, we know there can be pain points along the way when you choose to buy   a home with a group of your nearest and dearest. That’s why we created a model to handle all the administrative aspects of co-ownership, from buying the house or operating as an LLC to maintaining the property once you’re ready for your first stay. At Kocomo, we believe that a vacation home should work for the benefit of all the owners, so it can truly be the dream come true you hoped for.

Photo by:   Martin Schrimpff