How long have you been dreaming about owning a vacation home?
Imagine this: It’s a summer weekend, and the weather is beautiful. Your family packs up the car and heads to your lake house to spend a few days in the sun and sand. Or perhaps it’s the dead of winter, and you want to escape the snow and the cold by flying to your vacation home a few states away.
You may have been daydreaming about these possibilities for years now, but the truth is that you don’t have to keep dreaming: You can make it a reality.
Let’s discuss the process of buying property like a beach house with your family. We’ll provide you with all the biggest pitfalls to avoid and advice on how to safely buy a vacation home that your family can use to make memories for years to come.
Benefits of Buying a Beach House with Family
If you’re reading this post, you’ve probably already considered some of the benefits of buying a beach house for your family. However, there are so many benefits to buying a beach house that you may not have considered all of the possible advantages. Let’s look at some of the top benefits you can share with your family when discussing whether to buy a beach house together.
The first and most obvious benefit to banding together as a family to buy your beach house is that, as a group, you will be able to access vacation homes in better locations and with better amenities than you might be able to swing on your own. But your advantages don’t stop at a higher budget.
When you invest as a group, you also receive help maintaining the vacation property. Not only do you get help with maintenance, but that help comes from trusted loved ones rather than strangers you signed onto a timeshare program alongside.
Additionally, you can pass down your beach house to your family for generations to come. Your family can enjoy decades of vacation memories while contributing to generational wealth by maintaining a valuable asset across generations.
You can also help younger family members learn the investing ropes by bringing them into the investment with more experienced investors, helping to build generational wealth through knowledge.
Lastly, you can enjoy the benefit of a reasonably secure investment. By definition, a beach house or vacation home is going to be in a highly desirable location. Properties in desirable areas like beaches and vacation hot spots are less likely to be impacted by a downturn market and are more likely to grow rapidly during upmarket times. In other words: Not only is it a vacation home, it’s also a solid investment.
Tribevest knows a thing or two about buying a vacation home with family: It’s how we got our start! Our founder, Travis, first explored Tribevesting when he decided to buy a beach house with his brothers. He’s been through the pain points, disagreements, and challenges with this type of investment—and he designed Tribevest to help you avoid them.
Let’s dive into the top five pitfalls of buying a beach house with family and how you can avoid falling into them.
1. Neglecting to File an LLC
The first pitfall you may run into when buying property with family is the pitfall of keeping things casual. When working with family, making decisions using handshake agreements can be tempting. At the risk of sounding dramatic, this is the biggest mistake you can make.
Your family relationships are built on trust, but your property investment group needs to be a business relationship. Keeping those two relationships separate will not only help the investment go smoother but also help keep the peace with your family regardless of what is happening with the investment.
Instead of relying on a handshake, you should file an LLC. Formalizing your group with an LLC makes it easier to open a business bank account and purchase the property under that LLC. This business structure also provides a framework for dividing property ownership, which is essential.
Using an LLC can also protect your personal assets from liability in case of issues with the investment property. Filing an LLC is a simple, relatively inexpensive step that will save you headaches and heartache down the road.
2. Failing to Communicate
The surest way to cause interrelational problems when investing together is to miscommunicate. Don’t let miscommunication be the downfall of your family’s beach house! Maintain open lines of communication to ensure that your entire group stays aligned. When we say your entire group, we mean your entire group. That means no sidebar conversations.
You’ll also want to ensure that you align on several key elements before purchasing your vacation property:
- House Elements: Do you want a pool? Water access? How many bedrooms do you need? Consider all the elements of your beach house before selecting a property.
- Location: Location may be the most important piece of the puzzle. How close do you want the beach house to be to home? What neighborhood or area do you want to purchase your beach house in?
- Price Point: Lastly, your group will need to align on price. Ensure everyone has realistic expectations for their desired price and that no one feels they are being stretched too thin by the purchase.
After purchasing the property, you will need to maintain open communication regarding:
- Schedule: Who gets the beach house, and when? How do you plan to divide up the holidays or summer weekends?
- Maintenance: Who is responsible for fixing a broken appliance? How do you plan to budget for unexpected repairs? What about closing down the house at the end of the season? Make these decisions upfront and put them in writing.
To ensure you are maintaining open lines of communication on these subjects and more, you may want to employ the help of an alignment tool. Tribevest’s alignment tool provides you with a centralized communication channel for all investment-related questions, decisions, and more. Check out our features and pricing page for more information.
3. Under-planning (or Over-planning)
The next pitfall is a twofer: Under-planning and over-planning. Let’s look at each of these common missteps in more detail.
You’re excited about the opportunity, your family members are ready to pull the trigger, and you have enough capital to buy your dream beach house, why not just pull the trigger?
Pump the breaks: Before you start investing together, your group needs to make some critical decisions.
- Rental-Related Decisions:
Do you plan to rent out your beach house on weekends when no one is using it? Tools like Airbnb and VRBO make it simple to do just that. However, if you plan to rent out the property, how will the earnings be divided? Who green-lights the weekends it is available for rental? Make a game plan for all rental-related decisions upfront.
We touched on this briefly in the previous section, but it’s important enough to bring it up again. Who is responsible for what? Consider both financial and effort-related aspects of property management here. Misunderstandings relating to who is responsible for maintenance, various costs, and more can breed resentment and cause familial strife down the line. Set up a clear Operating Agreement laying out each party’s responsibilities to avoid these challenges.
- Additional Considerations: Lastly, before you jump into an investment, ensure that you have thought through your decision. Have you examined the home inspection report? What are the property management fees like? How about taxes? You’ll also want to consider its proximity to water—is there a high flood risk? You’ll also want to consider the neighbors. You should move forward with your purchase only once you feel comfortable with all of these aspects.
Now, we know we just said not to jump at an investment without preparing… but you also don’t want to drag your feet. If you’re nervous about investing in your beach house, it can be easy to get stuck in the weeds of details and “what-ifs.”
Pulling the trigger on your investment property is always going to be scary: It’s unlikely that you’ll ever truly feel “ready.” That’s why our best advice here is to trust your gut and understand when it’s time to stop dreaming and start investing.
4. Neglecting to Establish Succession Plans
The fourth biggest pitfall you may run into when buying a beach house with family is to fail to establish succession plans. No one likes to think about what may happen when a loved one passes on, but if you are entering an investment opportunity together, it’s something you need to prepare for.
The best advice we have here is to ensure that each group member specifically sets forth who can inherit a co-owner’s share of your beach house. Set these rules in your Operating Agreement, and adjust them as needed throughout the investment.
If you simply leave things be and allow the natural heirs to inherit the house, you may end up with people who don’t share the same vision for the beach house entering the investment late in the game. This challenge can cause stress for the surviving original and new owners, resulting in a mess that can make holidays with the family awkward moving forward.
5. Not Providing an “Out”
Lastly, you will want to ensure you provide an “out.” At the outset of your investment opportunity, you may think you would never want to give up your portion of the beach house, but people, priorities, and finances change as time goes on.
The best way to make an investment opportunity feel like a chore—and to breed resentment—is to trap investors into an opportunity without giving them a way out.
Establish a process that allows any co-owner to bow out of the investment at any point, should they choose to do so. You can review your buy-out clauses annually to ensure that the terms remain fair as the market fluctuates.
Buying a Beach House with Family: The Easy Way
Buying a beach house with family may seem a long way from possible, but you’re closer to being ready to make that purchase than you think. With the advent of new tools like Airbnb, VRBO, and more, you can easily turn what was once a fairly extravagant, dormant asset into a cash-flowing investment that can benefit your whole family in more ways than one.
Teaming up with family to buy the vacation home of your dreams is a great way to build wealth, learn property investing techniques together, and grow closer as a family. Your new beach house will be the site of hundreds of happy family memories for years to come and can provide valuable knowledge and cash to your family.
So, what are you waiting for? Use Tribevest today to coordinate your family investing efforts. You can use our tool to manage your LLC, pool funds, coordinate voting processes, and more. Check out the Tribevest platform today to see how we can help you buy the beach house your family has always wanted!