Fractional ownership is a great way to own a vacation home without the high cost and hassle of full ownership. However, it’s important to avoid these seven deadly sins and avoid the pitfalls to ensure a successful experience:
1. Petting the Puppy Before You’re Ready to Own a Dog
It’s tempting to go shopping for houses with friends to just have fun and see what you like. That’s a mistake. You inevitably will see something you like and then get drawn into the purchase process before aligning as a group on rules.
Getting aligned on all the important details before you start looking at properties is super important. This includes things like:
- How many weeks will each person own?
- What are the rules for renting out unused weeks?
- What happens if someone wants to sell their share?
- How will disputes be resolved?
It’s also important to have a clear understanding of each person’s financial situation. Can they afford to make their share of the mortgage payments, property taxes, and maintenance costs?
2. Trusting without Verifying
Just because you’re friends or family doesn’t mean you can trust each other blindly. Do your research and make sure everyone is financially stable and has a good track record of paying their bills on time. It feels super awkward to say it, but you should also know about your co-owners’ past behaviors. Finding out that you’re partnered with someone with items on their record after you’ve bought a house with them is an awkward time to lose trust.
3. Failing to Set up a Reserve Fund
Things happen, and there will always be unexpected expenses. A reserve fund will help you cover these costs without having to fight with each other about who should pay. We insist on 3% at Plum, which is funded at closing in the group’s joint bank account.
4. Putting Your Desires Ahead of What’s Good for the Group
Fractional ownership is a partnership, and everyone needs to be willing to compromise. If you’re always putting your own needs first, you’re going to end up alienating the other owners and making the whole experience miserable. You have to give a little to get a little.
5. Lacking the Courage to Speak Directly
Communication is key in any partnership, but it’s especially important in fractional ownership. If you have a problem, don’t be afraid to speak up. Bottling up your emotions will only make things worse. Groups also generally try to respond to individuals, and if you aren’t speaking clearly, the group will get wound around the axle trying to solve the wrong problem. Just speak politely and plainly about your concerns.
6. Being Loosey Goosey with the Schedule
It’s tempting to just wing it when it comes to scheduling time at the property. However, this is a recipe for conflict. Instead, create a formal schedule and stick to it as much as possible. Build in the ability to request a swap when needed.
7. Buying a House in Perpetuity with Others
Things change, and it’s important to have a way out of a fractional ownership agreement if necessary. Instead of buying a house in perpetuity, set a term for the agreement, such as 5 or 10 years. This will give everyone the flexibility they need if their circumstances change.
By avoiding these pitfalls or seven deadly sins, you can increase your chances of having a successful fractional ownership experience.
At Plum, we have technology and process that does all of this for you.
We understand that fractional ownership can be complicated, so we’ve created a platform that makes it easy to find the perfect property, manage your ownership, and resolve disputes. We also have a team of experts who are available to help you every step of the way.
If you’re interested in learning more about fractional ownership, we’d be happy to chat.
