The Pros & Cons of Co-Owning an Outer Banks Beach House


Owning a home on the Outer Banks is a dream for many people. The thoughts of escaping to your own hideaway whenever you want is so enticing that people will do whatever it takes to make it happen. Some even decide to pool their resources and team up with friends or family to buy that vacation property they have been fantasizing about.

But is this a wise decision? The answer, as always, it’s complicated. Let’s look at some of the benefits first.

You Have a Beach House

Well, a piece of one anyway. But it is a piece of a house that is much nicer than one you could afford on your own. One that is probably larger and closer to the beach if not on it directly. But most importantly, it is yours. You’re no longer using someone else’s plates or sleeping on someone else’s bed.

Lower Costs

Not only is the cost of buying the property divided, the costs of maintaining the house are divided as well. Same for the taxes, insurance, and utilities. Decorating and upgrades to a home are easier to the wallet as well when they are divided between owners.

Income Generation

Let’s face it, not many people out there can afford to be on vacation 365 days a year. If you could, you wouldn’t need to use the Buddy System to buy your beach house. There are going to be times when you and your co-owners are not in the property. Usually, those times are used as rental periods to bring some money back into the partnership. That income will cover part of your mortgage payment and overhead of the property.

But how do you decide when the property will be open for rentals? What if Owner A wants to use the house on July 4th, but Owner B wants to rent it that week because it is the most expensive? Sounds like trouble creeping into paradise.

Let’s look at the negatives of joint ownership and offer some tips on how to avoid them.


Disagreements will arise over who gets to use the property and when. This is unavoidable, especially when you start to mix in multiple factors like children.

The key to avoiding this pitfall is to plan ahead. Design a schedule early and set guidelines for how it can be modified throughout the year. Maybe allowing each owner to trade or sell their slots should the need arise.

Financial Dependence

You teamed up with your family and friends because you couldn’t afford the house you wanted on your own. But now you are both dependent on each other to make for the financial commitment. What happens if there is any kind of financial hardship (job loss, divorce, death) that hits?

Again, the key here is to plan ahead. Many financial planners advise forming a Limited Liability Corporation (LLC) to oversee the management of the property with annual meetings and legally binding rules agreed by all. A LLC also provides some mode of protection to the other owners should one fail to meet any monetary obligations.

Binding Ties

Another drawback is that you are now bound to your other owners. During your ownership together maybe you have a disagreement and are no longer friends. Or perhaps, you decide that enough profit has been made and want to sell your portion of the house and your co-owners do not. What is the exit strategy?

Once again, the key to avoiding any disagreement is to plan ahead. Before even purchasing the property, set up exit strategies for any possible situation. One key, especially if you do not choose to form an LLC is to structure the mortgage as Tenancy in Common.

This means that should one owner die, the stake in the property would pass down to their heirs and not be given to the remaining owners. That would be called Joint Tenancy on a mortgage and is usually set aside for married couples.

It is also important to structure the exit strategy in an agreed upon manner for any and all owners. Set an amount of time that everyone agrees to keep the property. Then evaluate how the ownership is going and whether or not to keep the property or sell.

In cases of ownership where there are more than two owners and one wants to sell their stake, give the right of first refusal to the remaining owners.

The key to making a joint ownership of a vacation property work is preparation and to treat the management of the relationship like a business. Taking emotion out of the equation will go a long way to keeping the relationships that you had when first purchasing the house.

For more information on real estate and the Outer Banks, please check out our blog.


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