Buying a vacation home is one great investment for people who love to travel. But what if you and your friends are planning to chip in overall to buy the property? Sounds like chaos? Some people might step back a little bit over this idea but if you think that this will work out for you and your friends, you can also consider these tips suggested by Realtor to avoid any miscommunications in the process.
Set it Straight: Is It TIC or LLC?
It is important to settle things straight first and to make clear arrangements. Choose which option will work best for you and your friends. The outlet includes the difference between TIC (tenancy in common) and LLC (Limited Liability Corporation). TIC declares many grounds that could hold you liable in the area.
"Under a TIC, someone injured while in your shared home could sue you and your co-owners for all you're worth." the outlet notes. Meanwhile, LLC entails more expense but according to Jennifer Bales Drake, head of the real estate practice group at Becker & Poliakoff, "With an LLC, 'you're treated like an individual for tax purposes, but with the protection of a corporate liability shield.'"
Apart from this, LLC also helps you and your friends set the legalities of ownership of the property. This is an important thing for a property that could be own by various people. Seek a lawyer on this process so that there a legal document of what agreements all of you have come upon.
"That ratio, be it 50:50 or 80:20, will determine how costs such as insurance and real estate taxes are divided," based on the outlet. "It should also detail 'who the manager of the property is, how the maintenance is going to be performed and paid for, and capital improvements. It gives [owners] a guideline so that everybody knows-before they even own the place-what the parameters are.'"
LLC also helps in setting decisions regarding scenarios that includes death. Based on their advice, all members have a say concerning the future of the house when one member passes away. "You can say if you pass away or want to sell, the other owners get the right of first refusal," informed Drake.
