The idea. Over the decades, we have seen a number of family members, friends, and co-workers come together to buy and use resort mountain property. Because of the economic times and time constraints, we suspect this will be an increasingly viable option for many people. We are NOT talking here about time-sharing or "quarter-share" ownership in which people buy property with complete strangers at substantially greater risk and complexity than what we will propose here. We are talking about people who already know and like one another and have common interests who are "buddying up" to buy a mountain place together. Our discussion here will reflect structures and arrangements that we have seen work successfully over the years and will also consider new financing requirements and legal ownership considerations.

A practical solution. Quite simply, four people coming together with $150,000 can buy an exceptionally nice $600,000 mountain home or two people (or families) coming together with $100,000 to $150,000 each can buy a delightful mountain cabin in the current market. Because most people cannot come to the mountains every single week-end to use their mountain home, the idea of sharing the time as well as the investments, carrying costs, and homeowner responsibilities have good practical merit.

The least debt, the better. The simplest arrangements for shared ownership are always the best. If it is possible to purchase a property with no debt whatsoever attached to the property, that simple act reduces the complexity of the relationship enormously. Money can, of course, be brought into such a purchase by equity credit lines on primary housing or other sources.

The legalities of joint or shared ownership. We have seen a very broad array of legal ownership structures that have worked well. Your attorney can advise you about what will work best for you. We have seen LLCs, Family Trusts, corporate ownership, retirement fund ownership, and joint ownership with and without rights of survivorship. In most cases, whatever the selected legal structure, it is difficult to arrange true separation or limits to liability or responsibility. Understand from the beginning that you are joining into a venture together in which you will typically be "jointly and severalably liable". That is why you would want to consider buying with people you know really well.

The current financing market for joint ownership properties. Residential financing rules and possibilities are shifting minute-to-minute nowadays. If you do need to seek mortgage financing to facilitate your mountain property purchase, understand that no matter what your structure of ownership (LLC, Trust, etc.), you will be asked to personally sign and be liable for the mortgage debt. FNMA and FMAC are placing severe restrictions on lenders to discourage them from making loans that are the least bit risky. As a result, at present, some lenders could only make "in-house" or "portfolio" loans to accommodate such a purchase. These typically have a short term like five years. But that arrangement may be all you need.

Other lenders, like Wells-Fargo currently, that are able to make loans to multiple joint buyers have additional constraints. They don't like more than six adult borrowers on a loan, and all loan documents must be personally endorsed. The participants cannot own more than four properties with mortgages. The mortgage loan itself cannot be in the name of an LLC or Trust, but would have to be in the names of the individual borrowers. That said, Wells-Fargo was able to offer up to 90% loans on second homes at the same rates as for individual buyers. This could all change in the next minute, but those parameters were being quoted in early December 2009.

Managing your shared mountain property. As a group of people, you will approach your joint venture with highly diversified skill-sets. You will want to set up your team management structure with the best-suited person assigned the most appropriate task, but you will also want to set things up so that responsibilities are not overly burdensome for individual members of your group. From the beginning, set up a way that a person can resign from a task if he or she needs to.

Somebody will need to manage the money. You will set up simple operating budgets, pool your money, and pay the expenses from that. But a single person will need to be responsible for the checkbook and for working out any accounting tasks that need to be done.

Somebody will need to be in charge of the time schedule for how the property will be available for the use of the different owners. This sounds hard but is probably the easiest part of your shared arrangement. Most successful joint-ownership situations that we have encountered set up their schedules a year at a time but allowed all kinds of flexibility about swapping and exchanging time periods. Where multiple families with children have owned something together, the children often show up at the mountain house in a variety of configurations. That's what bunk rooms are for.

Somebody will need to be in charge of over-all maintenance issues. The best joint ownership arrangements work when good attention is given to preventative maintenance issues. The fewer surprises, the better.

Somebody will need to be in charge of grounds care. Local grounds care crews can easily be hired to mow grass, clean gutters, and do other grounds-care tasks. It need not be a single owner's "job" to do these things. Set up your structure for the fun of it! Whenever a task turns into work, it ceases to be fun.

You will need to establish some basic occupancy rules. How is the mountain house to be left for the next person after a week-end's s fun? While basic pick-up and garbage removal duties can be easily established, the simple act of lining up a cleaning person to come in after use of the cabin is an easy way to minimize conflict among people with different evaluations of what is and isn't clean. Everyone needs to accept the responsibility for their own actions, but measures of cleanliness can be prickly points that you never anticipated.

You will need to work out policies and rules for allowing owners to "loan" their time to friends outside your ownership group. Your occupancy rules will go a long way to allowing that to happen.

Have fun! That's the goal. By setting up these fairly simple structures and rules, you, your family, friends, co-workers or whomever you have chosen for this venture should be able to share your mountain property with much less financial investment and responsibility. We truly do expect to see more and more of this in the future. Think about it. This may be your opportunity to have a place in the mountains!

Questions? Comments? Contact us HERE!