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Property Share Advice

MrGoodBytes

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So long story short, my friend group have been making use of this lake house for the past 15 years. It is without question, mine and my friends happy place. It was owned by my friend's grandmother who passed away at 93, due to family disputes, it is getting sold. Between me and another buddy, the money is there to take it over. I need advice for legal agreements on owning vacation property with a really good friend. He is the type of guy that we have never had disagreements and he is close enough that he is one of those "bail me out of jail" friends. I know this will be the real test of the friendship and I need to know ASAP what clauses or "pre-nups" I need to get arranged. Closing might be as soon as 2 weeks and we are both jumping in this blindly because we can't imagine not having this life refuge.
 

Blackhood

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Get a lawyer. I imagine that a lake house is going to run you $100,000. Even if you get an expensive lawyer, a couple of advice sessions won't run you more than a couple of thousand dollars. A 2-3% increase in the house-price but a 500-700% decrease in shit-storms when it comes to sell or in disputes.
 

VinnyMac

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Get a lawyer. I imagine that a lake house is going to run you $100,000. Even if you get an expensive lawyer, a couple of advice sessions won't run you more than a couple of thousand dollars. A 2-3% increase in the house-price but a 500-700% decrease in shit-storms when it comes to sell or in disputes.
+1

If you really are that close, then you should take extra precautions to make sure that the terms are spelled out clearly...not only the immediate terms but the contingencies. Money breaks up a lot of friendships and families. If you makes things crystal clear upfront, then everyone knows what to expect when/if they sign the agreement. Thinking "We're friends. We'll figure it out later" NEVER works.

On another note, there's a pretty big difference between hanging out at a vacation location and taking care of it for a month and actually owning the place. Are you sure that you actually want to own it, or do you just hate to see your "happy place" slip away?
 

v0rtex

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I need advice for legal agreements on owning vacation property with a really good friend.

As someone with experience of very bitter family disputes when shared ownership goes awry, +1000 on the advice to see a lawyer and draft some sort of agreement that covers the worst case scenarios, including how to dissolve the deal if someone's circumstances change or how costs are shared if a large unexpected expense comes up (new roof? pipes burst?).

Owning property is a long-term consideration with lots of unexpected expenses. Life circumstances change - you or your buddy may need money in a hurry at some point (divorce, illness, lawsuit, kid's college) and need to back out or sell their share in a hurry. Or someone's (future) spouse may become resentful of all the money being dumped into "that shack in the woods" and demand they sell it.

If you're splitting the cost because you cannot afford to carry it yourself, be extremely careful that you've correctly estimated the costs of running the place all year (taxes, maintenance, upkeep, local management/inspection if you are a long way away). Consider having a third or even fourth backup person from your friend group on the list to take over if one of you can't carry on with the arrangement. Consider keeping an escrow account that you both contribute to for ongoing expenses and emergencies.

Have the place properly inspected before you buy it, and try to detach yourself from the emotional attachment you have. If it needs extensive repairs or is highly inefficient to run then you should run away if you ever want disposable income again. The cost of renovating/repairs would pay for many happy summers in a brand new rental that is someone else's problem to look after...

Basically, be careful, treat it like buying into a small business, get the worst case scenarios written down while you are both best of friends and make it easy to dissolve the agreement.
 

xpress

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I've done this, albeit it was on income properties.

We spoke with various lawyers, and eventually we ended up with a VERY detailed document, that you might say is similar to a co-habitation agreement.

It states what will happen in every event imaginable.
I view it as an insurance policy.

The biggest factor in our policy is to put the same, and take the same.

If I put $100 in repairs, he needs to put $100 in repairs, and so on.
Sometimes easier said than done.


Oh, and the whole thing cost maybe $500 each.
 

VaderDave

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I have drafted many contracts like the one you describe (including operating agreements for closely-held businesses, which are similar in spirit) and the simple fact is that an agreement works until it doesn't work. When someone loses a job, or gets married and has kids (when you don't), or otherwise has some life change that makes the agreement untenable, then that's that--having a document to cover you won't save the underlying relationship. So just keep in mind that you are looking for an agreement that is a worst-case-scenario document, not something that will preserve the friendship.
 

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