Should friends buy a destination or vacation home together?

Good question. There's really no dependable data on the topic, and the issue might top the charts on the list of cultural "pros versus cons" debate.

On the "good" side, it's certainly cheaper to buy a vacation home when you have a buying partner in for 50% of the cost. On the "bad" side, when you have a friend on board, it's not really your home, is it?

Bryant McClain, director of Keen Initiatives, a real estate company that specializes in Caribbean resort sales and marketing, offers more on the good news/bad news issue.

"On the upside, most second home owners don't use their vacation home more than a couple months a year, so owning with others gives them each plenty of usage while lowering their cost of entry," McClain says. "Also, their budget often doesn't allow for the size of home that they desire, or location -- waterfront properties are a premium, for example -- so when they share ownership, they are able to attain a larger or more luxurious home than they could afford by themselves."

On the downside, there needs to be a very clear arrangement for owner usage, and how to handle when one owner wants to use more than another, McClain notes. "Also, the rental income and capital appreciation of the real estate is split, so while it lowers the cost, it also lowers the reward," he adds.

Structurally, buying a home with a friend isn't for everyone.

"It takes a rare group of friends to successfully buy a vacation property together," warns Brian Davis, co-founder of, and a real estate investor who owns 15 properties.

Davis says buying real estate is a long-term commitment, and one that involves an incredibly valuable asset. "It takes a uniformity of vision, for multiple people to buy and manage real estate together successful," he explains.

It takes a great deal of prep work, too.

"I would suggest caution when purchasing a property jointly," says Michael Kelczewski, a realtor with Brandywine Fine Properties, in Wilmington, Del. "Consulting an attorney to assure equal distribution of title/liabilities is a must. As we know, friendships may wane, especially under financial constraints. But investing with partners/friends or relatives can be a good option, once responsibilities are understood."

If you're still on board with buying a vacation home with a compadre, Michelle Farber Ross, managing partner and broker at MMD Realty advises taking the process very seriously.

"You'll need to treat this partnership as a business and clearly define the parameters, so that all parties can enjoy the use of the home and benefit from profits realized upon the sale of the property in the future," Ross says.

To illustrate that point, she recommends following these "fundamental points":

  • Be clear - transparent understanding at the onset of searching.
  • Speak with a tax attorney to decide the best vehicle to purchase the property. Depending on whether the group is from the U.S. or abroad, there are different entities that offer different tax benefits.
  • Clearly define share of time used. Outline the times that each person is entitled to use the property
  • Draft a partnership agreement to provision for a split - in the event that a split occurs.
  • Don't leave any gray areas that will be left for translation.
  • Clearly define payment split of maintenance and costs
  • Clearly define how profits will be split whether the property is rented or sold at future date
  • Clearly define how the property will be paid for and if one partner defaults, the actions that will follow.

Watch out for red flags, too.

"While purchasing a vacation home with friends allows for some positive outcomes, such as a possible return on investment as well as opportunities to utilize the space on vacations, the thing that is most often over looked is the level of risk," says Craig Dacy, founder of Craig Dacy Financial Coaching.

Dacy says that when taking out a mortgage on a property with another party, you rely on their ability to maintain payments. "But what if they lose their job or go through a divorce or another life event that renders them unable to make payments," he notes. "If the housing market is in a downturn, this can be financially devastating, as insufficient mortgage payments can hurt the credit of all members on the deed."

Erica Miller, a realtor who sells vacation rentals with The Flamingo Group in Orlando, Fla., advises anyone who's considering buying a home with a friend to proceed with caution.

"When you're investing with friends you need to make sure everyone is on the same page up front with the time commitment that is involved with vacation rentals," Miller says. "Vacation rentals always have a post-sale commitment in terms of responding to emails, marketing and budgeting. If your friend isn't willing to put in half the work, then it's not a good idea to invest with them."

Also, make sure both parties agree on how much each will set aside for maintenance reserves every year, adds Miller. "Find out if they want to be more of a silent partner or a hands-on partner before you buy," she says.

If you want to get more creative in buying a vacation property, bring in more than one friend, Miller adds. "Many people get a group of friends together and form a fund," she explains. "They then buy multiple vacation rentals with the fund money."

As far as buying a destination home with a friend goes, there are multiple factors to weigh before signing on the dotted line. Think it through carefully, get everything in writing, and have an attorney review the deal.

Only then start thinking about those matching drapes.