Should you buy a cottage with family or friends?

March 4, 2021

If you’re looking to buy a vacation home, teaming up with friends or family can be tempting  – particularly if you’re looking to buy a cottage in Ontario where recreational property prices increased by 20 per cent in 2020. Pooling resources gives you a competitive advantage in the market, plus you’ll be able to share the carrying costs and ongoing property maintenance.

But while co-ownership comes with plenty of perks, it can also have negative consequences on relationships. Think of cottage co-ownership as going into business together; careful planning, open communication, and compromise are key.

If you wonder whether co-owning a leisure property is the right choice for you, here are some tips on how to share a family cottage or buy a vacation home with friends.

Should you buy a cottage with family or friends?

[Photo Credit: Grispb]

Consider your finances

While going in on a down payment together increases your buying power, all parties must qualify for a mortgage in an equal co-ownership arrangement. Securing financing for multiple individuals can be complicated, especially if you have varying levels of income and debt. First, ask yourself, ‘Can I afford a cottage?’ then determine who will be listed on the property title and how much liability you’re willing to take on as a group. Variable-rate mortgages offer more flexibility and lower penalties if you need to break your mortgage before the term ends.


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Make it legal

For the sake of maintaining amicable relationships, hire a lawyer to provide professional advice on how to share a family cottage. Paying for a lawyer will increase your up-front costs but will save you a lot of conflict and heartache in the long run. Lawyers can help you structure your cottage agreement and will act as an intermediary if disputes arise over septic tank repair bills or who gets the cottage for Canada Day.

Prepare a contractual agreement

Draw up a contract that clearly defines the terms of your co-ownership agreement to ensure all parties are protected. This operating document should cover how expenses are handled, who takes care of the maintenance (both day-to-day and major repairs), and how time-sharing and scheduling will work. You’ll also need to create a long-term plan for how the property will be divided among the future children and grandchildren of the current owners.

Set up a maintenance fund

Vacation properties can be a costly investment, so it’s prudent to create a shared fund that owners contribute to regularly. Similar to monthly condo fees, this communal account can be used to cover the carrying costs, utility bills, routine maintenance, and emergencies. A shared cottage fund can also be used for fun items, such as watercraft, furniture, and games.

Be ready to compromise

Strong opinions and co-ownership arrangements aren’t a good mix; when multiple parties are involved you might not always get your way. Consider how you might handle disputes over decor, pets, Internet installation, guests, or renting the property to a third party to help generate income. What are your priorities, and what are your deal-breakers? Make sure you’re all on the same page – or are willing to compromise – before making a significant financial investment together.

Determine an exit strategy

You might think you’re buying a forever property, but circumstances can change. Exit strategies are a crucial part of co-ownership, so your ownership contract must indicate what happens if and when someone wants out of the arrangement. Determine contingency plans for a variety of scenarios, including divorce and job loss.

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