Dream of a second home? Consider buying with friends.
Current soaring real estate prices might have you wondering if you’ll ever be able to afford that vacation place in the Caribbean that was in your five-year plan, or that weekend getaway Upstate you’ve always talked about. You might consider pushing off your goals of second home ownership to yet another undefined, far-off date, resigning yourself to hours of flipping through AirBnb every time you put PTO on the calendar. Meanwhile, remote work makes the prospect of living in another location (or even another country) for part of the year that much more enticing—while rising interest rates and lack of inventory make it that much more difficult to take advantage of the freedom to roam.
Vacation homes might feel like a luxury now reserved only for the 1%. But second home ownership isn’t as unaffordable as you might think. It just takes a little creativity…and a few of your closest friends or family.
Buy a second home with friends: a trend worth investing in?
Faced with mounting housing costs, some millennial buyers are taking inspiration from the sharing economy to make it happen: they’re buying vacation homes with their friends or family as a way to enjoy the benefits
According to data obtained by the Wall Street Journal, the number of co-buyers with different last names increased 771% from 2014 - 2021, indicating the popularity of joint ownership isn’t just on the rise, it’s skyrocketing. And that figure shows no signs of slowing down. It’s no wonder; owning a home with friends isn’t just a way to make second home ownership possible, it’s a way to upgrade from your basic, ho-hum vacation condo to a house-of-your-dreams luxury home.
For example, a designer-furnished 3 bed, 4 bath tropical penthouse in Tulum with a private pool will set you back around $1m if you’re buying alone. But if you go in with 7 friends, you’ll pay just $116,195 apiece, with the added benefit of enjoying it all together. And that stake nets each friend 6 weeks of personal use per year.
In addition to staying at your home with or without the whole crew, buying with friends presents an opportunity for renting out the home to cover the cost of the home. And second home ownership is a great way to build equity, even for city-dwellers who rent their main residence, especially in up-and-coming vacation areas that are likely to see explosive growth in the coming years.
Sounds great! What are the downsides?
Owning a home with friends can be a complicated process [link to what could go wrong article], both logistically and emotionally. Real estate lawyers, operating agreements, and multi-person mortgages can make purchasing the home a cumbersome undertaking, not to mention the ongoing maintenance of the home and scheduling stays amongst you and your friends. Big financial decisions can put a strain on any relationship, and your family and friends, even if you’ve known them for years and trust them implicitly, are no exception to the potential for conflict. Settling the expenses for a million-dollar property is a lot tougher than splitting the bill at a restaurant—and even that can be a challenge for some groups of friends!
Fortunately, there are services to make buying a home with friends much more turnkey. Kocomo, for example, is a co-owning platform that facilitates not just the group purchasing process for a vacation home, but also the ongoing maintenance and management of the property. They’ll set up an LLC for your group to buy the home of your dreams, handle all the legal details, insurance, and taxes, and act as a neutral third party to ensure everyone in the group is treated fairly and equitably as co-owners. Proprietary scheduling software allows all owners of the house to book time in the home when they want it, and also enables big group vacations, so planning reunions and hosting your annual girls’ weekend becomes a breeze. And Kocomo specializes in international properties, making it a breeze to buy globally.
Kocomo can also facilitate rentals through their platform, so you won’t need to separately manage AirBnb or VRBO listings if you decide to rent out your new property. If one owner wants to leave, Kocomo deals with the legal negotiation of the exit process, leaving the difficult emotional conversations out of the ownership equation.
Buying a home together can be an incredible way for friends to build equity and support each other in achieving their dreams. But mixing business and friendship is often a recipe for disaster (or at least a recipe for very awkward group texts), and it’s advisable to use a third party administrator to help mediate the process. So your vacation home feels like the oasis it was always supposed to be.
Download Kocomo's 5 Key Steps to Buy a Home with Friends and Family Guide to better understand how this process work and start your journey.
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