What is co-ownership?
Co-ownership occurs when two or more parties jointly own an asset such as a home. In this arrangement, all owners are listed on the asset's title, signifying that each holds a specific percentage of ownership. Opting for co-ownership means entering into a legal and financial partnership with the other buyers and an agreement about shared property access.How does co-ownership of a house work?
Co-owners of a house share obligations like property taxes and mortgage payments. Each co-owner must agree to decisions like renovations made to the property. Co-owners are also typically responsible for maintenance, but when you co-own with Pacaso, we handle that for you.Shared ownership homes may work through either a joint tenancy structure or a tenancy in common. With a joint tenancy arrangement, all people have equal ownership of the home. With a tenancy in common option, the amount each person invests in the property determines their share of ownership. More on that below.What is a co-owned home?
A co-owned home is a property purchased and owned jointly by two or more people. All owners are included on the title of the home, and all parties hold a portion of ownership in the property. When you buy a shared ownership house with other buyers, you enter into a financial and legal partnership and a new living arrangement.Why is co-ownership on the rise?
Co-ownership has traditionally involved a group of friends or family members coming together to buy a second home, or a child inheriting a house from their parents or grandparents.While co-ownership isn’t a new concept, it has become a more viable path to second home ownership. As real estate prices continue to rise, it can make more financial sense to combine finances with other buyers and share the costs of buying and owning a home, especially for those who feel priced out of a home in the current market. In a 2024 report, 28% of prospective buyers said they would purchase a house with a family member or friend. Of those, 69% said they would consider co-ownership homes to be able to afford more than they would be able to on their own.Types of co-ownership
There are different types of co-ownership, including tenancy in common, joint ownership, community property and tenancy by the entirety. Each type corresponds to a different set of rules and allowances.Tenancy in common
A tenancy in common (TIC) is for two or more people with an ownership interest. Tenants may have unequal investment stakes. For example, one owner might have an 80% interest with two co-owners at 10% apiece. Often, this corresponds to the financial investment contributed at the original purchase. Unless explicitly stated otherwise in the deed, TICs do not have rights of survivorship. Property shares pass to an heir if a tenant dies instead of the remaining tenants. Tenancy in common is available for everyone, regardless of their marital status.Joint ownership
Joint ownership, also known as joint tenancy with rights of survivorship (JTWROS), specifies that tenants hold equal ownership rights. This holds true even if only one person paid for the property — anyone listed on the deed has ownership of the property.- Time: Ownership interest must begin at the same time for all joint tenants.
- Interest: All the tenants must have equal interest in the property.
- Title: All the tenants must receive the same title in the deed.
- Possession: Access to the property and usage rights must be the same for all tenants.
Community property
Married couples may co-own title as community property in nine states: Arizona, Texas, California, Idaho, Louisiana, Nevada, New Mexico, Washington and Wisconsin. These states recognize couples as a single financial entity. A right of survivorship must be specified so that when one spouse dies, the other can automatically take over the title. Unlike JTWROS, there’s no guarantee of automatic survivorship rights.Tenancy by the entirety
Married couples can also choose tenancy by the entirety (TBE) as their co-ownership model. TBE is a type of joint tenancy that comes with survivorship rights. This ensures the property avoids a costly probate process and passes immediately into the widowed spouse’s hands. Tenancy by the entirety views couples as one financial entity, so the property is considered to be owned by “one person.”Modern co-ownership
Pacaso is an example of modern co-ownership, the new way to co-own luxury vacation homes. Modern co-ownership comes with some key differentiators, such as:- Limited liability company (LLC) structure: Pacaso’s co-ownership model works through a professionally managed LLC, letting you dodge the risk of independently managing a property.
- SmartStay scheduling system: You can seamlessly book stays in the Pacaso owner app to enjoy your home throughout the year.
- Curated luxury homes: Our portfolio is carefully curated with attention to interior design, amenities, art and estate management.
- Fractional ownership: Co-owners can choose to own one-half to one-eighth of the home and share the cost of maintaining it.
- Professional management: From maintenance to billing, Pacaso fully manages all aspects of the home.
What Pacaso property managers handle | |
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Financial oversight | Aggregating and managing monthly home operating expenses. |
Vendor management | Overseeing all vendors and contractors for maintenance and services. |
Legal & administrative | Maintaining the LLC and resolving any disputes between owners or with the municipality. |
Home maintenance & turnover | Managing all aspects of home maintenance and services required for owner transitions, ensuring the home is always ready for your arrival. |
Technology & owner support | Continually innovating and improving the Pacaso app and other digital technology, alongside providing dedicated owner support to ensure a seamless experience. |
Pros and cons of co-owning a home
As an alternative to buying a whole second home, co-owning a house offers owners a unique set of benefits for buyers, as well as things to consider:Pros
- Opportunity to own. Co-owning a home with other owners gives you access to a home that might be outside your budget. With multiple owners sharing the costs, you can enjoy all the amenities or use it as an investment without breaking the bank.
- Usage time. Because you own the home, you have the right to enjoy your property to the fullest extent, depending on your type of co-ownership.
- Deeded ownership and equity. Shared co-ownership gives you a deed to a fraction of the home, which means the value of your unit of ownership moves in line with the real estate market. You get the same opportunity to build equity as with a whole home.
- Shared maintenance costs and responsibilities. Most co-ownership agreements include guidelines for owners sharing home upkeep and handling any issues. Shared ownership means you are only responsible for a portion of the expenses and responsibilities. This could be beneficial for owning a second home, which has expenses, maintenance concerns and logistics to consider.
Cons
- Personal challenges. Co-ownership is subject to changing dynamics, relationships and conflicts that could arise between owners.
- Fewer financing options. Fewer banks offer mortgages for co-ownership, so you may need to shop around for ways to finance your purchase.
- Less freedom. Any decisions about maintenance, repair, decor and selling your ownership must go through the other owners, which can be a hassle.
- Payment risk. Co-ownership financial responsibilities fall on all owners, even if one owner does not pay.
What’s needed to start a co-ownership agreement?
Whether you are doing DIY co-ownership, buying community property or using a fully managed co-ownership provider like Pacaso, it’s important to have a written agreement that outlines the terms, structure, management and financial and logistical aspects of the shared homeownership. Common elements of a successful co-ownership agreement include:- Buyer names
- Home description
- Ownership structure (amount of interest for each person)
- Roles, rights and responsibilities
- Individual contributions
- Payment management
- Maintenance and repair management
- Decision-making process and resolution
- Contingency plans
- Exit strategy
Tip: A co-ownership agreement should be drafted before you even purchase the home to ensure a smooth purchase experience. You might also consider consulting a real estate attorney. Co-ownership involves many moving parts, and an agreement should be adapted to fit the owner group over time. |
Types of co-owners
You can co-own a home with a family member, friend and even a stranger. The people you’re looking to co-purchase a home with could influence the type of co-ownership. For example, friends, partners and strangers might consider a TIC or joint ownership, while married couples might benefit from community property and TBE.Buying a home with other people is a major undertaking, regardless of the co-owner. Not only is DIY co-ownership challenging, but it also presents factors outside of your control. Job changes, financial disruption, health issues and other major life and lifestyle changes could impact each person’s commitment to the second home.Co-ownership mortgage differences
If you decide to purchase a home through co-ownership, you and your co-owners will likely take out one mortgage loan — unless you plan on paying all in cash.Advantages of co-ownership mortgages include:- Buyers can combine their income and debts to improve their chances of getting a larger loan.
- You share the financial responsibilities with multiple people.
- A solid credit score is still essential, as many mortgage lenders will use the lowest credit score to determine qualifications.
- If one owner cannot make their payments, the financial responsibility falls on the other co-owners. Otherwise, the account will be penalized and even foreclosed on.
Differences between a co-signer and co-buyer
A co-buyer (or co-owner) is different from a co-signer regarding ownership and payment. Co-signers take full responsibility for a loan along with a primary signer, but they do not have any ownership rights to the home. In contrast, a co-buyer has equal or similar rights to other buyers co-owning the home.Another difference is that co-buyers are responsible for payment from the start of the loan. Co-signers, however, only assume responsibility if the primary signer is unable to make their mortgage payments.Selling a home with co-owners
If you decide to sell your home, there are scenarios to consider: The first is where all owners want to sell, and the second is when one owner wants to sell their ownership interest but the others do not.If all owners of a co-ownership property decide to sell, the situation is less complicated, as there would be no debate over the right to sell. Outlining these terms in the co-ownership agreement from the beginning is critical.What happens when only one person wants to sell? With certain co-ownership models like tenancy in common or joint ownership, you have the right to sell your interest in the home. While you cannot sell without the permission of the other owners (as you do not hold sole ownership), you can still share your share at any given time once approved. The buyer of your share — which could be another co-owner — would take on the same portion of ownership that you held in the property.H2: Co-ownership vs. fractional ownership
While co-ownership and fractional ownership are often used interchangeably, there are slight differences between the two models. Fractional ownership involves a buyer purchasing an ownership interest in a resort property or unit. Co-ownership is a step above fractional ownership, where people can co-buy a private, high-value home or investment property with other buyers. However, unlike timeshares, co-ownership and fractional ownership models provide deeded ownership, shared costs and usage time in your home.Co-ownership | Fractional ownership | |
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Ownership rights | Deeded ownership | Deeded ownership |
Financial responsibility | Owners are responsible for taxes and mortgage payments | Owners are responsible for taxes and mortgage payments |
Purpose | Investment property, vacation home | Resort property |
What you own | Co-own the property together | Own shares of the asset purchased from the owner |
Tips for co-buying a house
If you’re thinking co-buying is for you, here are some additional tips to consider:- Determine your budget: Being financially transparent with everyone you’re entering co-ownership with is important.
- Know the financing risks: Financing a co-owned home is similar to financing a whole home, but it does include additional considerations and risks.
- Understand the different types of co-ownership: Joint ownership and TIC are viable options for people who are not married to each other. Owners have unique rights to the property depending on the co-ownership type.
- Create a co-ownership agreement: Draft an agreement outlining responsibilities and other details to ensure all owners are on the same page.
- Co-own with Pacaso: Pacaso provides hassle-free, true real estate co-ownership. Our in-house property management team handles the day-to-day operations and upkeep, allowing you to enjoy your home without the typical responsibilities of ownership.
Co-own a home today
Co-owning a home empowers people to own property and build equity while lowering the financial and logistical burdens of buying and owning a whole house.Pacaso takes the risk out of DIY co-ownership and provides peace of mind when you co-buy your dream luxury vacation home. Pacaso co-ownership makes buying a second home effortless. We take care of the details so you can sit back and relax in your favorite home away from home.Co-ownership FAQ
01: How is co-ownership established?
Co-ownership is established in a property deed and title, and you can also find details in your mortgage paperwork. If nothing is specified and you’re not married to the other tenant, the state will list the property as a tenancy in common or joint tenancy by default.
02: What is probate, and why does it matter for co-ownership?
After someone dies, probate is the legal process where debts are paid and the assets of the estate are allocated. Co-owned property with survivorship rights bypasses probate because there’s nothing for the court to decide — the owners are listed on the deed, which superseded the will.
03: How do you sell a shared ownership property?
It depends on the kind of co-ownership. A tenancy by the entirety is only valid while the owners are married, so a divorce or death dissolves the co-ownership. For a tenancy in common, all owners have to agree to dispose of the property.
In most cases of co-ownership, individual shareholders can independently sell their shares to exit the property.
04: What kind of co-ownership does Pacaso offer?
Pacaso offers fully managed LLC co-ownership. Designed as a straightforward approach to co-owning a second home, Pacaso’s model allows up to eight owners to each have a 1/8 ownership interest in the LLC, and the LLC is the entity that is named as the owner on the deed. You own 1/8 to 1/2 of your Pacaso, with maintenance, management and day-to-day updates handled by our Crew. View our residential listings and see the benefits of owning a second home with Pacaso.