Everyone always asks me for more posts about buying property with friends, but I never really knew what they wanted to know. Last week on my new YouTube Live show, Tea Time with Tynan, I asked people for their questions about buying property with friends. People asked some great questions, so I figured I’d collect the best of them and answer them here as well.
How do you choose where to buy a place?
The way we’ve chosen each place has been different. We chose the island because we desperately wanted to buy an island, and the Halifax, Canada area was the only place to buy a cheap island that looked good and was accessible. In retrospect I think we got really lucky here, because Halifax is great. Budapest was chosen because I went there a couple times and loved it. It was the first place in Europe that I really wanted to get to know on a deeper level. Its central location also made it an easy sell as a European home base. Hawaii came when we realized that all of our properties were better suited for the summer than the winter, so we started looking for tropical places. I originally chose San Juan, Puerto Rico, but after visiting it again I wasn’t convinced it was a slam dunk. Japan has been on the list forever as it’s the one place that all of my friends and I keep going back to year after year. The only reason it was the last one purchased was because it was so hard to find a good place.
Within each city (island excluded), we try to buy as centrally as possible. Budapest and Hilo (Hawaii) are right downtown. Tokyo is 4 minutes from a station that servers two major subway lines, and a 15 minute walk to Shinjuku.
How much do they cost and how is money handled?
Each one has been in the 100-150k range TOTAL. People always think that you have to be super rich to do this, but you basically just have to be at the “could buy an extra used car” wealth level. Each one has been split 6-11 ways, so people have contributed anywhere from under $10k to just over $15k.
Ongoing maintenance varies a bit. Most properties are in the ~$50 a month range per person, but Hawaii is $100 because the HOA fee is annoyingly high.
For the initial purchase I figure out a price range in which I know I can buy a property, and then I get everyone to agree. Once we find the property I pay the deposit myself (it’s always much less than my share is going to be anyway), and then I collect money from everyone else. I have also learned to leave a buffer of $5000 or so to cover initial furnishings, unexpected fees, etc. I create an LLC and a bank account (Wells Fargo only has a $500 minimum to have no fees on a business account), and have everyone send their money there.
I use stripe to collect monthly fees, which are deposited to the bank account. Usually I just pay everything with my own credit card and then reimburse myself. I track expenses in Google Docs (I have one sheet for all properties to make things easy).
In practice bookkeeping is a little bit loose. Several of us who use the properties a lot often end up paying for stuff without reporting the expenses, and I sometimes forget to log mine anyway. This started because there was a big wealth disparity during part of the island development, so one friend funded a few big expenses like buying us a better boat than we could have justified (after we sunk our first one) and building a platform for the yurt.
How do you convince your friends to buy these properties with you?
This really starts with just picking properties that I know people will enjoy and then selecting friends for whom buying a share of the property will be a great value. Luckily most of my friends like to travel, have similar interests to me, and can afford ~$10k for a lifetime vacation house. I send a big long email that I call something like “The Hawaii Hard Sell” and I outline why I picked the place, what there is to do there, how much it will cost, and what the experience will be like once we get the place.
After doing the island I had a group of 3-4 people who will say yes to any property, so I sometimes give them a preview and get them on board first so that I only have a few other spots to fill.
How do people get out of it later?
You can technically sell your share to anyone, but in order for them to have permission to access the island they must get unanimous approval from the rest of the group members. In practice nobody ever sells their share. One friend who was involved in Hawaii but moved to a country where it was really hard to get to Hawaii ended up selling his share at cost to another friend, and then using that money to buy into Tokyo instead.
I try to make it VERY clear up front that this is not a financial investment and that you should assume the money is spent and unrecoverable. That way we think of these properties as permanent home bases. If we did much more expensive properties, this would not be possible.
How do you handle maintenance and upkeep?
What happens in practice is that people who use the properties the most end up doing the most work, but they also get the most benefit. For example, I’ve been personally involved in every island project from clearing trees to cutting trails to building the yurt. These have all been really hard work but… I also use the island the most. My friend Brian is also very involved in every property and he does a ton of work on them as well. Other people do almost no work, but they also barely ever visit the properties, so they’re not creating any sort of wear and tear.
I personally handle all of the bills and paperwork and all that, but I got to pick the places and the people, so the arrangement is more than fair.
Do couples count as one person or two?
Shares are sold individually to each person. Any member can invite unlimited friends/family members to accompany them whenever they want, but cannot send unaccompanied friends. This extends to couples. If I have a share but my wife doesn’t, we can always go there together, but she can’t go by herself.
How do you handle usage?
At a fundamental level, anyone has the right to go to any of their properties at any time no matter what. In practice, though, there are a few different kinds of trips that happen.
Most commonly a few of us get together and say, “Hey, want to go to Hawaii next month?” We plan a trip and then just go. I don’t think it has ever happened that more than one group has randomly been at a property at once.
If someone wants to bring a lot of guests or wants the place to themselves, they post in the property-specific facebook group and requests that no one visit during that time. Technically others could still visit, but people respect requests.
Once in a while one of us will just pop over last minute without telling anyone.
We also have an informal rule that those who use the properties the most yield to others. I’ve visited all of the properties the most, so if I had a trip planned but someone else wanted it to themselves, I would just change my plans. Right now one owner is living in the Hawaii place every other month, but he has made it explicitly clear that anyone can displace him at any time.
People often think that scheduling would be difficult, but it’s much more common that we would be trying to get others to join us on trips than it would be that we would be trying to exclude them.
How many people can each one accomodate?
It varies from property (Tokyo is 4, the island is probably 15), but I generally try to make it very comfortable for 2 people, and feasible for as many as possible. For example, in Budapest there are two bedrooms. The big bedroom has two twin beds that can be joined into a king. So a couple or two friends can visit and have a ton of space. In the other much smaller bedroom we have a bunk bed plus a trundle bed. Downstairs we have a fold-out couch.
Each property has two bedrooms (though in Tokyo one of them does double duty as a living room), so that two friends can go and have separate sleeping and work spaces.
I think those are the major questions that people were curious about, but I know there are always more questions. Something to think about is that when I started this I didn’t know any of this information and had to just figure it out. If I can figure it out, you can too. Get some good friends together, choose a property that makes sense, err on the side of it being inexpensive, and then figure it out as you go. That’s half the fun, to be honest.
I am doing another YouTube Live Tea Time With Tynan today! Join us!
Photo is a bridge near our place in Hilo