Although most of us would prefer to buy with friends and family, Tenant-in-Common legal expert Andy Sirkin points out that putting together such a group is extremely complex. “I tried it early on in my career, and we came up against a seemingly endless brick walls,” he says. “The chances of all of you liking the same location, the same construction, the same approach to the issues of sale and rental, and willing to accept the same percentage of responsibility is extremely rare.”
Conversely, Andy has found that groups of co-owners put together by someone owning a property, whether it’s an individual with vacation condo or a big developer with a large complex of vacation homes, as has been popular in Aspen and Vail for many years, are more likely to work.
An owner/developer needs to put the co-ownership buying group together thoughtfully, with a good co-owner agreement and a well-built, well-located property. They need to have a committed lender all ready to go. Then any buyer coming in can evaluate the deal much more clearly. Clear evaluation leads to clear buying decisions.
Andy points out that there is no way to eliminate the risks of co-ownership, but there are ways to lower them.
Besides having a co-ownership agreement, he lists five steps that will help diminish the risk of co-ownership. Here are the questions potential co-owners need to check out, whether you’re buying with your buddies or buying with strangers:
- What is my per-night cost when I add up all of my annual costs (including management fees and dues) and divide them by the number of days I can use the property each year?
- With pre-packaged deals, what is the owner/developer’s track record and financial situation (as well as what is happening financially with your co owners)?
- What kind of control will I have over the group management company and how my costs (particularly management fees and dues) increase over time and how the property is managed and maintained?
- To what extent am I free to rent out the vacation home and control the rent charged?
- What restrictions apply to resale, what competition will I face within the property and in the immediate area, and what financing — if any —will be available to my buyer?
Shari Steiner is a licensed real estate broker, a speaker and the co-author of Steiners Complete How-to-Talk Mortgage Talk and Steiners Complete How to Move Handbook. You can find out more or ask her questions on her www.movedoc.com website.