If you purchase a cottage with your spouse, it is generally no different from how you own your regular home with them (and your children and pets, should you have them). However, owning or investing in a cottage with friends or extended family can be quite complicated and turn into another thing entirely.
With this in mind, here are five important things to consider before investing in a cottage with family or friends to ensure all of you make the right choice :
Ownership
When you invest in a cottage with your spouse, ownership is usually simple in that you just have both of your names on the appropriate documents. This generally means if one of you were to die, the survivor takes full ownership.
However, the issue of ownership and whose name(s) go on the appropriate documents can be up in the air when investing in a cottage with friends or extended family. Will one person’s name go on the ownership papers? Will all of you be listed as tenants in common?
There are two other significant issues related to ownership you must consider before taking the plunge on a cottage with family or friends. The first, of course, is what happens if one of you wants to get out of the investment. What protocols will be in place to facilitate such a scenario? Will the other owners absorb the remaining share of ownership? What if there is a mortgage involved?
There will be a similar consideration with the second issue: what happens if one of the investors dies? Does their will take precedence, and their heir takes over that portion of ownership? Or do the other investors decide?
Financial Obligations
When you have multiple investors or owners, especially in real estate, there are significant financial obligations to consider. For instance, how much is each person going to invest? If you need to take out a mortgage, how will you set up future payments? The question of financial obligations also plays into the next item of consideration on this list: maintenance.
Maintenance
You and your friends or extended family will need to maintain the cottage you invested in. This will mean simple things like regular cleaning, but can (and will at some point) extend to larger items like fixing plumbing, landscaping, additions to the cottage, et cetera. There are two parts to consider related to maintenance. One is who will pay for the maintenance, and the other is who will perform it (e.g. will the owners do the work or will you hire people to do it)?
Interior Design and Decoration
While you might have similar tastes, it is also possible you will clash with your friends or family when it comes to how to design and decorate the interior of your cottage. This is perhaps one of the simpler issues to deal with when investing in a cottage with family or friends since you can always practice the art of compromise. For instance, if there are enough rooms in the cottage for all of you, maybe each person gets to have full control over the design and decoration in their room. Common areas will likely need input from everyone, but as long as everyone is considerate, this isn’t a huge hurdle.
Scheduling
Sometimes you will want to spend time at the cottage together — great! Other times you might want to come on your own, or with others not part of the investing partnership. This is why it is important to consider how scheduling will work with the friends or family you choose to invest in the cottage with. It may not be possible to pin down specific dates for future years, but you should still discuss how often each of you might want to use the cottage together and with others. Have an idea of what the schedule might look like: e.g. everyone gets a week in the summer, and any extra time can be switched off and discussed in each specific situation.
