# Hypothetical DC



## caribbeansun (Apr 1, 2007)

Having read Perry's posts about creating a home made DC lets say I found a new DC (for lack of a better description) but this DC allowed for the following characteristics:


full participation in the underlying properties
allowed members to sell their interest at any time without restriction,
had properties worth between $800k - $1M,
capped leverage of the properties at 40-50% with 15 year repayment terms,
had mf's of approx 12% of capital cost plus share of debt repayment (think reduce entry point via leverage)
access to say 5 wholly-owned properties and reciprical rights to use up to 25 other properties with some restrictions
4 weeks access annually
at least a 10:1 member to house ratio
What would you think would be a good price point for such a "club" and would you change any of the above?


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## PerryM (Apr 1, 2007)

*Sounds interesting, but....*

Sounds good so far; a few questions:

1)	Who owns the deeds?
2)	Are future membership fees based upon the “Theory of Equals”?

*Ownership of Deeds:*
My major reason for not buying a DC is the real estate appreciation – I don’t get it but the founders do.  This ultimately gets back to who really owns the deeds – the members or management.  Show a baby boomer fantastic condos in fantastic location and real estate appreciation and you would need armed guards to protect yourself from us wanting to get a piece of the action.


*Calculating Membership Prices:*
The problem with leveraging homes is that the bank owns the units and not the members.  If something goes wrong the bank and creditors carve up the DC and the scraps go to the members.  I just don’t like mortgages and DCs.  There is a real risk of losing control.

Renting units is something that could be done – some resort areas are enacting rules to prevent DCs from getting started.  There are just a few now but that could grow.  Also, RV’s could be added to the club.  The way RV’s or airplanes, or house boats, or anything that decreases in value is to rent them.  You do this by putting the $1 M in safe money markets that generate 5% and you get $50,000 per year for rent payments.

If you leave out mortgages and 100% is invested in the actual condo or in safe money market accounts then you can do a yearly real estate appraisal/audit and divide the total worth by the number of members and calculate the current membership fee - the "Theory of Equals".  You can’t do this with mortgages – they are an expense with a little debt retirement thrown in.

But we seem to be getting closer...

P.S.
If you add up all the DC memberships they would be less than 4,000 I think - the entire industry is ready to be defined by a large company who knows how to make money by selling real estate and not an empty promise.


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## BocaBum99 (Apr 2, 2007)

I don't think your hypothetical DC is possible unless of course all of the owners are friends just trying to share costs together.  Why do I say that?  Because the creators of the DC want to make money and they make money at the owners expense.

The market for DCs are rich folks who don't care much about the money they put into the DC.  It's a luxury item akin to a Country Club membership.  You own it for prestige, not to make money.  DC owners make their money elsewhere.  And, they make a lot of it.  So, if they take a bath on this asset, it really doesn't matter much to them.

By the way, taking a bath means putting in $200k and getting back $300k after 10 years of ownership.  That's a paltry 4.1% CAGR. That's because a rich person knows how to take the same $200k and turn it into $1.8M or more after 10 years.  That is a 25% CAGR, a fairly easy bar to hurdle if you actively manage your investment.

So, the key thing to look at is how does the DC operator make money?  Through upfront fees or ongoing management?  Or, a split of both.  Either way, they plan to make a lot of money and the DC owners will be the primary profit donors.

I'm with Perry.  I much rather be the creator of the DC than a buyer of the DC.  I'd make a ton of money off of the rich folks and get free trips to great places at their expense.


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## PerryM (Apr 2, 2007)

*Co-ops it's not just for farmers..*

I see no reason why a DC co-op could not be started.  BB is right that the folks now running the DCs are making a killing and the rich folks see this as chump change and if they lose money or get nothing but some great vacations the prestige of staying in multi million dollar homes/condos and not at huge resorts is what they really want.

So if there is a real estate lawyer out there who wants to spawn an entire industry – it would take little to form such a co-op; it’s just a pile of paper that could ignite an inferno.  Once one is established more could start – just like chat rooms.

I think many baby boomers could be enticed into this life style and the co-ops could dominate the DC industry.  Cut out the middleman.


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## Ken555 (Apr 2, 2007)

A DC co-op? Wow, what a great concept. And to think I'm not even a baby boomer!


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## hipslo (Apr 2, 2007)

PerryM said:


> I see no reason why a DC co-op could not be started.  BB is right that the folks now running the DCs are making a killing and the rich folks see this as chump change and if they lose money or get nothing but some great vacations the prestige of staying in multi million dollar homes/condos and not at huge resorts is what they really want.
> 
> So if there is a real estate lawyer out there who wants to spawn an entire industry – it would take little to form such a co-op; it’s just a pile of paper that could ignite an inferno.  Once one is established more could start – just like chat rooms.
> 
> I think many baby boomers could be enticed into this life style and the co-ops could dominate the DC industry.  Cut out the middleman.



This is a great idea!  Even if the organizers factored in some sort of modest annual management fee based on number of properties or number of members, and helped themselves to say, 5% of the value of the portfolio, or maybe 10 - 20% of the INCREASE in value of the portfolio, along the lines of a hedge fund/ private equity manager (liquidity issues would need to be worked out in terms of how they'd raise the cash to pay these fees, given that there would presumably be little selling of the appreciated properties, as the members would need to use them), this would still be much more attractive to members than the typical DC model that exists today. 

If the sponsors were able to attract enough members and manage the properties well, they'd create quite an annuity stream for themselves, while creating a wonderful product for the members.  I agree with Perry, its only a matter of time before someone bites the bullet and decides to take this approach, and if it works you can be sure that others will follow.  There are already one or two models similar to this out there, but the buy in costs are too high for the concept to catch on more widely, as the clubs seek to purchase 2-3m properties.  Change the model to 800k- 1.2m properties or so, have membership buy in set around 100k, and give members the opportunity to REALLY participate in upside appreciation of the portfolio, and these sorts of DC's would become very difficult to ignore.  The marketing hype ("Own dozens of vacation properties for less than the cost of a down payment on just one!") would become reality.


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## caribbeansun (Apr 2, 2007)

1) Everyone (lets use your co-op idea) - management retains a percentage (less than 20%) for the back end payoff and reduce front end loading as per BB post

2) Yes, theory of equals would apply, however, short amortization periods on the debt.  Getting to critical mass without some leverage would be very difficult wouldn't you think?  Of course if one is beating people off with a stick then the whole leverage thing could be tossed out the window.



PerryM said:


> Sounds good so far; a few questions:
> 
> 1)    Who owns the deeds?
> 2)    Are future membership fees based upon the “Theory of Equals”?


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## PerryM (Apr 2, 2007)

*Take PayPal?*

The fantastic thing about DCs is that you could start with just a few condos/homes and it would mushroom – pick a theme 1) Skiing/Mountain, 2) Beach, 3) Amusement 4) City 5) Hawaii and buy 1 in each or 2 and you have all the makings for a DC.  Throw in real estate appreciation near 100% and I’m ready to buy a membership today!

I like the idea of if a member wants out that the Co-op has a ROFR (Right Of First Refusal) and/or the DC could buy a membership back, at 100% the current fee on a 2 in/1 out basis.

The management fee is just part of the normal things real estate folks do:

1)	5% fee for a broker to buy a condo/house (5% of $1 M = $50k split 2 ways = $25k fee to our broker * 5 homes = $125k)
2)	Yearly management fee to run club.  This should be small since a scheduling program would allow members to schedule units themselves.  8% of membership fee is standard = $10k per year per member or $80k per condo.  This would have to cover housekeeping fees, management fees, and reserves.

Real estate folks do both of the above.  We have a property manager handling our second home – they find renters, manage the house, and make it worry free for 10% of the rent charged.  We just get a check each month that exceeds our mortgage payment and smile all the way to the bank.

So, where do I send the check, or do you take PayPal?

P.S.
Chat rooms like the one TUG uses cost peanuts to buy and maintain – the Co-op could ask for volunteers and make “Sweat Equity” a part of ownership – you volunteer 10 hours of your time a year to the Co-op.  REI is a Co-op – I get a credit each year for buying things thru them – I save lots of money.  

The Internet allows average folks to do extraordinary things - we don't need some big shot to build our own DC.  This is not true with a timeshare or condo-hotel.

P.P.S.
Start with 5 condos at 8 members each = 40 memberships at $125k each.  Count me in as one so only 39 more memberships needed to start this thing.  The Helium Report places great emphasis on 100 members - that would mean a second round of 5 condos and we are close to 80 members.  In no time we would be one of the largest DCs!


P.P.P.S.
This lack of "Barrier to Entry" is why the existing DC members should be scared of their investment - a bunch of folks on a chat room could dominate the industry if fortune smiles on us.


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## smbrannan (Apr 2, 2007)

I'm also a fan of this co-op DC idea.  Pooling resources to buy vacation properties is a great way to sidestep the folks (timeshare co's, DCs) who want to sell people an emotional experience, but keep the financial gain for themselves.

I don't see anything inherently wrong with using leverage in a co-op DC.  Just as long as it is not aggressive.  Figuring out the value of the members equity is still fairly easy - have the properties appraised and deduct the debt.  Divide by the number of members, and you have the current price at which new members can buy in (assuming the co-op is accepting new members).

The alternative would be for the co-op DC to be unlevered, and leave it up to the investors to decide whether or not to leverage their personal investment.  Problem with this is that it might be easier for the co-op DC to get mortgages on the properties, than for the individual investors to use their equity in the DC as collateral.  Some folks might have this kind of cash lying around, but given the way that timeshare developers, even the good ones, pitch financing, I suspect that most people would need some leverage to make a go of this.

I think that members/investors really would need to understand that this would likely be a *very* illiquid asset.  Sure you could set up a mechanism to replace members when someone new wants to join, but without a serious marketing program it might be a long time before a new investor comes along.

Since this is almost certainly going to start out small, the choice of locations is crucial.  I'd suggest that you need to focus on locations that have year round appeal  -  if there are 4 or 5 locations, and 40-50 members all trying to go golfing or to the beach during the same weeks a lot of folks are going to be disappointed.

Just my two cents


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## PerryM (Apr 3, 2007)

*Market Forces*

REI is a Co-op and heavily advertises – the DC Co-op would do the same.  Somewhere in the budget is an advertising amount that would be used to “spread the word”.  The more folks that join, the more condo/homes for folks to use.

To address the concerns of full usage only the ski condos might be affected.  Here the ski weeks and perhaps the summer weeks are desirable and they might have restrictions as to multiple usages just like holiday weeks.

The other approach is to use a Point system.  Instead of 28 days of usage you get 3,500 Points (2 regular weeks @ 700 Points each and 2 holiday weeks @ 1,050 each).  Holiday weeks would be 50% more than non holiday weeks or 150 Points per day.  The weeks would cost 1,050 Points instead of the normal 700 Points.

A Point system would do away with the need for restricting holiday usage – during the 1 week of reservations (Starting 6 months out) the minimum would be 1,050 Points (for holiday week) and you could add any number of Points to get your week.  If you really wanted a certain week at a certain condo you could add 200 Points, for instance, and at the end of the first week of reservations the computer would award the week to the highest bidder (Sealed bid auction).  Points would carryover 12 months before expiring.  Points could be sold to other members for market prices.  Points could be borrowed from the next year.

I favor the market approach to reservations – no restrictions and you get to bid as much for a holiday week or any week you want.

I still favor 100% cash payment for the condos – no mortgages.  Each member is free to arrange for financing anyway they want.


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## caribbeansun (Apr 3, 2007)

Points is an interesting idea although the borrowing forward could create problems as you would in effect create a potential demand that is double the supply if everyone did it in the same year.

Renting of weeks amongst members is a very novel idea and a very good one!

The sealed bid idea is also quite an intriguing concept - where do you come up with this stuff Perry?

I've always believed in making things simple - which is likely how the weeks thing came to be because you can explain it.  Getting into points might complicate things to the point (no pun intended) that it scares people off.

Limited use of leverage would seem, IMO, to keep your building/buying slightly ahead of the signup curve as well as lower the entry point which is why it made some sense at least to me.  Think in terms of the lag between signing up those 10 people and the buildout of a new project - that could be 2 years in some cases.  That's a big hurdle at startup.


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## smbrannan (Apr 3, 2007)

Some thoughts on access -

I like the flexibility of points systems, but I think they are best suited to very large operations with multiple size units in each location.

This would be too complex to administer for the Co-op DC, at least in its early years.

Instead I like the approach that "Storied Places" uses for their 1/10th shares of luxury homes.  At the start of each year, every member submits a schedule with their preferred dates for use of the homes.  They have a program that allocates the available time out to members based on their requested dates.  I think they also keep track of whether a member was unsuccessful in getting a date that they wanted and then gives that member's choices higher priority the following year.  I think that Storied Places has two go-rounds on the allocation process, but the Co-op DC may not need to do this.  In fact it might be better to do go through a single allocation process semi-annually.

This means that you don't need to have someone on call all the time to take reservation requests.


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## Ken555 (Apr 4, 2007)

Interesting thread - keep going!

My $0.02. 

I don't currently travel during the holidays and don't foresee that changing anytime soon. I like programs that "charge" more for holiday weeks since that makes it easier (in a way) for me to get the non-holiday weeks. In this theoretical DC, I'd like the ability to "sell" my right to a holiday week in exchange for first choice of the non-holiday reservations or extra days or less inital buy-in cost or...etc 


As for reservations, simpler is usually better. Why 700 or 1050 points, when it could just be 1 point for a regular night and 1.5 or 2 points for a holiday night. Then again, I agree that a points system would be overly burdensome - at least at first glance - for a new program like you propose.

Re leverage and financing. No mortgage is always better, but in order to attract more members I suspect you'd have to find a reasonable method for financing. Then again, this is the type of thing which would be better financed via a HELOC, for those who need, and then it's completely separate from the DC and the property purchase is on a cash basis.

And if the home is unused, would it be rented to reduce maintenance? Or rented to DC members at a reasonable nightly rate? Perhaps if the unit is unreserved 15-20 days ahead then it can be rented, or if using points perhaps rented for less points than normal? Of course, I still say a simple program works best... hmm, I'll think about this and post more when I'm awake...


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## PerryM (Apr 4, 2007)

*Simple is as simple does...*

*When 8 members own a condo that's 365/8 = 45 days of usage per year per membership.*  Many DCs advertise 4 weeks, or 28 days, and the remaining 17 days is “open” for short term usage.  In Hawaii this makes no sense at all.  In a ski resort this might.  So I really favor 45 days usages per year.  That leaves 5 days for deep cleaning of the condo.  You buy 1/8 of a condo and you use 1/8 of the calendar year.   All check-ins either Friday, Saturday, or Sunday across the DC - for the ease of the cleaning crews - just 1 day.

If you decide to only take 14 days of vacation and the reset, 45-14 or 31 days should give you a higher priority to holiday weeks that should be taken into account.  So here is another version of how reservations could be done:

On the anniversary of your membership you get 45 days of usage in your account.  6 months before check-in reservations opens for that week and for 7 days you can submit a sealed bid.  If you want, for instance, 7 days in early November in Maui you would bid 7 days.  At the end of the 7 days the computer opens the bids and the member bidding the maximum days is the winner.  If a tie occurs, the member with the lowest membership number (the oldest) wins.

For Christmas week in Whistler you might bid 14 days for the 1 week, or 15 days, or heck all 45 days.  There is NO need for guessing which weeks are more desirable than others – the members decide that themselves.  Historical wins/bids are displayed for the members to get a “feel”.

If you want 2 weeks together, you would have to win each week separately.

If you have to cancel a vacation the sealed bid auction would work the same way.  You list your week and folks bid on it - either in days of usage or cash.  The winner gets the reservation and the seller gets either days or dollars.  A reserve could be used and is displayed to the bidders.

Members could swap reservations privately if they wish.  Just the membership number would be changed by the owner of the reservation.  The DC does not get involved.

So here is a Point system with no maintenance by the DC, the computer picks the winners.  If you don’t win, you keep your days and they can “roll” forward indefinitely.  You can also “Borrow” days from next year’s usage. 

Members could sell unused days to other members in a similar way – sealed bid auction.  You list an auction item of say “6 days” and the auction would run and the winner paying the most money wins.  Ties would be decided the same way - the member with the lowest membership number wins.  Again the seller could have a reserve, and that amount would be displayed.


Heck, membership numbers could be sold too.  If you have a low membership number you could swap it with someone in the same way - sealed bid auction.

The more freedom you give the members the more control they feel they have over their investment.


If a member, like a retired couple, wants to buy multiple memberships they can opt to have just 1 account with all the days in it.  If you own 2 memberships you would get 90 days in your account.


All weeks can be rented for cash to the public and even this could be a service sponsored by the DC - either a sealed bid auction or regular auction or classified ad.  Since the owner can change the name and address on the reservation the DC has only one activity for an outsider.  If a person rents, who is not a DC member, a credit card number, security deposit charged to the credit card, and rental lease needs to be gathered.

P.S.
Once the 1 week of sealed bids expires and the week has not been claimed you can simply reserve it for 7 days of usage anytime, and multiple weeks can be concatenated together.  e.g. you see 3 weeks open in Park City during the summer - costs just 21 days.  (After the 1 week of bidding elapses for the 3rd week)

P.P.S.
Not all weeks in a condo are created equal.  Either management forces a stiff, stringent scheme on the members or the members use market forces (auctions) to decide who gets a week.  If someone knows of a better way, I'm all ears.


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## hipslo (Apr 4, 2007)

PerryM;311949 If a tie occurs said:
			
		

> Any concern that this could render it difficult to attract newer members as time goes on?


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## PerryM (Apr 4, 2007)

*Flexibility is the key...*



hipslo said:


> Any concern that this could render it difficult to attract newer members as time goes on?



Since membership numbers can be swapped a new person could send a PM to an older member and make an offer.

Of course the computer could just randomly pick a tie winner - however that opens the entire system to rumors of "Secret schemes" and I don't favor that.  Ties could be settled with another bid - this time an open cry type of auction.  Heck, each tie winner could guess the DOW's closing number the next day and the closest wins.

If folks don’t like sealed bid auctions or outcry proxy auctions (like eBay) there is the Reverse Auction.  The reverse auction works like this:

6 months before check-in day a Reverse Auction opens for each week.  On that day you can reserve the week for a cost of 45 days (Highest amount first).  The next day will be 44 days  then 43 days…until 7 days of usage.  This would mean that bidding goes on for 38 days (45-7).  Anytime you feel you want the week you click the “Reserve” button.  The days change at Noon CST each day.  Just before the next lower day is up for auction anyone that clicked the "Reserve" button in the prior 24 hours wins the reservation – ties are settled with the lowest membership number.

There are many ways to handle holiday weeks that allow the members to decide premiums versus management.  Using the Marriott approach of reservations must be avoided at all costs.


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## Ken555 (Apr 4, 2007)

PerryM said:


> Not all weeks in a condo are created equal.  Either management forces a stiff, stringent scheme on the members or the members use market forces (auctions) to decide who gets a week.  If someone knows of a better way, I'm all ears.



I'm not sure I like the idea of auctions for vacation usage in a DC. Perhaps something similar to fractional, where each owner automatically gets a holiday week on a rotating basis? 

There should be some method to adjust the holiday week value as compared to non-holiday weeks without encouraging members to "spend too much" for vacation time. While I understand your proposal, I'd be concerned this would give the DC a bad reputation (and hurt sales) if people think they aren't getting full value for their investment. Of course, it would be up to the individual to bid 'just enough'...


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## PerryM (Apr 4, 2007)

*I understand*



Ken555 said:


> I'm not sure I like the idea of auctions for vacation usage in a DC. Perhaps something similar to fractional, where each owner automatically gets a holiday week on a rotating basis?
> 
> There should be some method to adjust the holiday week value as compared to non-holiday weeks without encouraging members to "spend too much" for vacation time. While I understand your proposal, I'd be concerned this would give the DC a bad reputation (and hurt sales) if people think they aren't getting full value for their investment. Of course, it would be up to the individual to bid 'just enough'...



I understand your concern - however eBay has auctioned off 3 billion items with seller and buyers arriving at a fair market value without a "higher power" imposing all kinds of restrictions.


Timeshares have the developer deciding what's a holiday and what they are worth (And of course making big bucks) - this is how we all make timeshare reservations now.  A true free market might be a little scary but those of us who use eBay would have little discomfort.

But I do understand the concern.


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## PerryM (Apr 4, 2007)

*Holiday Points*

One last scheme…(I hope)

Ok, here is yet another way to handle holidays – I mooched this from a DC or someone that actually uses this method.

You get 45 days per year (1/8 year) or something close to that per anniversary.  The DC established a holiday schedule for the club.  You then get 100 Holiday Points at each anniversary too.

Holiday Points (HP):
You have 100 HPs to bid each year on any holiday week.  Let’s say you want to either spend Christmas in a ski resort or on a Maui beach.  You would split your usage 50 Points on the ski resort and 50 Points on Maui.  This goes on during that first week of the 6 month lead to the check in day.

At the end of the week, the highest bidder get’s the week – ties are settled somehow (lowest membership number is simple).  If you win you exchange the points bid for the holiday week.  If you lose you keep the Points.  HPs can be rolled forward and borrowed like most Point Systems.  The HPs can be sold to other members too.

If you win a holiday week you give up the bidded HPs and number of days you are allowed.  HPs, however, can be used other times of the year too.  If you want a normal week and someone else wants the week you must bid HPs to determine the winner.  So in that 1st week of the 6 month lead you would also place a sealed bid using HPs at the arbitrator of who gets a normal week.

P.S.
The goal of any equitable holiday (or normal) usage is to make ALL members equal and let their personal preferences and actions determine how they use the DC.  I favor leaving the DC out of ANY aspect that regulates the usage of their investment - let the members determine this.


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## smbrannan (Apr 4, 2007)

I’m as much of a free market guy as anybody, but something strikes me as wrongheaded with taking this approach to determining access to the DC.  After all, one reason for owning rather than renting is to make it easier to take a great vacation without needing an advanced degree in game theory.   

That being said, conflicts are inevitable so there needs to be some priority scheme.  I just think it needs to be even more simple than PerryM’s proposals  .  The sealed bids, using all your points for one week, borrowing points from next year, and carrying over unused points are all unnecessary complications.

A simpler approach would be for members to select their choices for vacation weeks in order of priority.  If each member is entitled to 4 weeks, they should select 5 weeks.  The 5th week would only be used if they failed to get one of their top four choices.

The DC then looks at the first choices of all members.  If two or more members have chosen the same week as their first choice, one member is chosen at random (all members are equal, regardless of when they join).  For the members who didn’t get their first choice, their remaining choices are bumped up by one. (i.e. their original second choice, becomes their first choice and so on).  This process is repeated, until all members choices have been satisfied, to the greatest extent possible.

If someone is unlucky and has weeks left at the end of this process, they can designate them as super priority weeks during the next allocation process. In the allocation process a super-priority week trumps someone else’s first choice.


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## Ken555 (Apr 4, 2007)

PerryM said:


> I understand your concern - however eBay has auctioned off 3 billion items with seller and buyers arriving at a fair market value without a "higher power" imposing all kinds of restrictions.
> 
> 
> Timeshares have the developer deciding what's a holiday and what they are worth (And of course making big bucks) - this is how we all make timeshare reservations now.  A true free market might be a little scary but those of us who use eBay would have little discomfort.
> ...



I think it's a mistake to equate buying and selling on eBay with a DC scheduling process. Speaking as someone who's been using eBay since they first started (way before their IPO), I am very comfortable buying and selling online. That isn't my concern. My concern focuses on the nature of even having an auction process - of any kind - to determine who gets what week. 

I think we should look at alternatives.


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## Ken555 (Apr 4, 2007)

smbrannan said:


> I’m as much of a free market guy as anybody, but something strikes me as wrongheaded with taking this approach to determining access to the DC.  After all, one reason for owning rather than renting is to make it easier to take a great vacation without needing an advanced degree in game theory.



Exactly. Fundaentally, this is why I am attracted to the fractionals and their 1:4 usage. It's your time every so often regardless if you use it or not. Of course, that's not very efficient, but it doesn't require a lot of planning, either. That might not work in a DC, but perhaps there is a way of building something close...


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## GregGH (Apr 5, 2007)

*Co-Op DC ??*

Co-op DC

Love the idea’s flowing in this thread – wow –  ( and if anyone does do this – PM me on this, please.)

Questions – just to keep the thread alive

1)How big is too big – regarding number of members?  True- the more members – the more locations  to choice from … but how will problems and issues ‘scale up’ with extra members.   5 Locations = 50 members -   but will 10 locations and 100 members just double the problems  or does it become exponential?  Or – am I pessimistic –will problems diminish as you grow on a per member basis?

2)minimize legal bills ..here I go being pessimistic again – sorry – can we agree to binding arbitration on any dispute … vs… people whom love to sue?

3)do you buy shares in the ‘Company’ which in turns buys the property?  Or could you ( single or as a group of up to 10) buy the property and then buy shares in the Company  ( to agree to the rules and procedures of the company for exchange weeks )  - which  becomes more like a co-op ‘EXCHANGE Company’.   

4)can we allow pets but charge accordingly for extra cleaning  fees

5)Can one book longer than 7 days if one has built up extra ‘points’  based upon some of Perry’s comments

So – someone start a new thread so we can discuss the possible locations?  That could keep a new thread quite busy, eh?
Regards
Greg


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## Noelle (Apr 5, 2007)

It's amazing - what great ideas.  You all really had me following the debate and I think I understood most of it  ... except for 1 little detail  ... what does DC stand for ?   Remember - there are no stupid people, just stupid questions or something like that... Noelle


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## smbrannan (Apr 5, 2007)

GregGH said:


> Co-op DC
> 1)How big is too big – regarding number of members?  True- the more members – the more locations  to choice from … but how will problems and issues ‘scale up’ with extra members.   5 Locations = 50 members -   but will 10 locations and 100 members just double the problems  or does it become exponential?  Or – am I pessimistic –will problems diminish as you grow on a per member basis?



At some point this would become a full time job for someone to administer.  Once it reaches that stage it becomes less of a co-op and more of a commercial enterprise.  I don't know for sure, but 5-10 properties "feels" like the right size to me.



GregGH said:


> 3)do you buy shares in the ‘Company’ which in turns buys the property?  Or could you ( single or as a group of up to 10) buy the property and then buy shares in the Company  ( to agree to the rules and procedures of the company for exchange weeks )  - which  becomes more like a co-op ‘EXCHANGE Company’.



I think the idea is that the members own a pro rata share in all the properties, so buying through a special purpose company, or limited partnership, makes sense.  That way the members share in the appreciation of a reasonably diversified portfolio of properties.




GregGH said:


> 4)can we allow pets but charge accordingly for extra cleaning  fees



That's hard.  There aren't a lot of developments that allow pets.  And as the DC would only be buying one unit in a devlopment it wouldn't be in a position to change the rules.   I'd hate to limit the DC to only buying pet-friendly units.  



GregGH said:


> 5)Can one book longer than 7 days if one has built up extra ‘points’  based upon some of Perry’s comments



Members who book more than 7 days in a row, make it harder for others to get the weeks that they want.  I'm in favour of booking weeks separately.


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## PerryM (Apr 6, 2007)

*Sorry....another scheme*

DC := Destination Club – a group of condos/homes (units) owned by a club that sells memberships.  95% of the existing DCs sell a membership that grants access to the units for the members while the Club owns the units.  The members buy the units for the founders of the Club.

A DC is so new that there are no laws that protect the DC members – just the promises of a salesrep over the phone.  To me DCs are a great way for folks to pool their assets and share in the real estate appreciation of the units AND use them while they are increasing in value.  It addresses the Achilles’ Heel of timeshares – lack of real estate appreciation.

DC’s are the closest thing to a “Virtual condo” that I’ve come across.  I’ve always had the dream of a “Virtual Condo” that you buy and it exists in many locations at the same time.  DCs go a step further and are fractionals too – you just buy what you need for your vacations.

The only Achilles’ Heel of DCs is the problem of high demand weeks and how equal members get them.  If two or more members want the same week at the same exact condo, what is the most equitable way to award the unit to just one member?

On the one hand the DC can make up rules on rolling usage like a Fractional – you get your week only once every 4 to 8 years.  I dislike this method intensely.  I favor the owners deciding who gets the week by market forces.  Since most Americans are very poor at negotiating prices (we just pay the sticker price) we have a problem haggling – how many of us love to shop for a car and duke it out with the car salesreps?


Here’s yet another technique to handle high demand weeks:

Bidding opens for 1 week at the six month point.  7 days is the minimum bid.  At the end of the week there are 3 members who want Christmas Week at Whistler:

Member A bid 14 days
Member B bid 8 days
Member C bid 10 days

The fair market value of the week is 14 days.  However, the reservation does NOT automatically go to Member A.  Member C, the second highest bidder, now makes the decision as to whether they want the week and must pay 14 days or let Member A have it for the 14 days.

Here’s the kicker – the other party gets the excess days deposited into their account.  If Member C can’t afford it, then Member A pays the 14 days and 7 of those days goes into Member C’s account!  If Member C decides that they do want it, then they pay 14 days and Member A get’s 7 days deposited into their account.  Ties are settled by the earliest timestamp of the bids.

If only 1 member ever bid, they get the week automatically for their bid.  If a member does not bid more than the 7 day stay, they aren’t eligible to participate.


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## GregGH (Apr 6, 2007)

Noelle said:


> ..... I understood most of it  ... except for 1 little detail  ... what does DC stand for ?   ... Noelle



DC= Destination Club.    see  http://www.heliumreport.com/  for some examples.

What TUG needs is a sticky post of all short forms --some are really hard to figure out ...    Noelle - I share your pain at times in reading some posts and trying to figure the letters out

Greg


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## PerryM (Apr 6, 2007)

*Weekends Only….*

We have a furniture chain store in St. Louis called “Weekends Only” where they are only open Friday-Sunday.

Timeshares in many locations are really the same – ski season or summer and then the rest of the year they sit empty – however the A/C or heat  must be kept going, the front desk 24/7, and the swimming pools operating most of the year.  I’ll bet they wished they were a “Busy Time Only” resort.

A DC has it much better but a ski resort in Park City, for instance, is empty Mid April – Mid Dec.  Whistler has it better and the same for Lake Tahoe.

So I’d recommend resorts that would be in high demand for Baby Boomers to spend some retirement time in.  Ski resorts would be out for the first “core” units.  Florida and Hawaii would be first.  In fact, I’d propose that each Co-op have a “theme” – like “Sunny Beaches” or “Caribbean Fun” or “Hawaiian Memories” or “Romantic Getaways”, or "Frugal Vacations".

If you look at a Ski Co-op they have high demand Mid Dec – Mid Apr and there could be some demand Jun – Aug.  This is what their members are buying into.  An Orlando Co-op is Jun – Aug with Christmas and New Year as high demand – this is what they buy into.  Maui is all year long – that’s what they buy into and they may have membership fees significantly higher than an Orlando Co-op.

There could be a Co-op of “Frugal Vacations” that cost half a ski membership which is half the cost of a “Donald Trump Destinations”.  The Co-ops have reciprocal rights to other DC Co-ops but there is, of course, a “Kicker”.

The “Kicker” gets back to money; more specifically rental rates per night.  If the rental rate for a Christmas week in Whistler is $7,000 and the rental rate for an early November Orlando is $2,000 we have a problem with one Co-op allowing access to another Co-op – or do we?

Market forces can once again make all parties a winner.  If  you lock in that Christmas ski week in Whistler you can use it, rent it out for cash (with tax implications) or deposit that week into the Exchange Club.  If you deposit that week, you get 7,000 Exchange Dollars (Points, but too many Point systems here – it gets confusing).  You can now shop for other units in the Exchange Club.  Don’t have enough credits?  Simple – pay cash and that cash goes to the owner of that week.  If you have too much Exchange Dollars in the account it can’t be withdrawn but does accrue “Interest” equal to the CPI.  (Keeps up with the rental rates).

Example:
You belong to the Orlando Co-op and deposit a Christmas week and get $3,500 into your Exchange Account.  If you don’t use the money it will appreciate 1/12 of the CPI (Let’s just say 3%) or .25% each month.  If it takes you 6 months to find a great exchange your account will show $3,552.50 (6/12 of 3%).  You have no risk to making a deposit or if you should see some juicy exchange just use PayPal to make up the difference.  Cash payments go to the owner of the week and their account will be reduced by that cash payment.

Conclusion:
There is no reason why I could not belong to the “The Frugal Vacationer” which only cost me $50k to join, and exchange into Christmas week in Whistler – of course I’d need to have made a couple of deposits and/or pay cash to get that ski week.  If a week expires without an exchange the credits are removed from the member’s account and could actually have a negative balance that must be made up at some point.


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## PerryM (Apr 7, 2007)

*My head hurts….*

Ok, I’ve got more schemes up my sleeve than a magician.  Here’s another:

On June 1 of each year each member gets 6 weeks of usage for the next year, in this example 2008.  Each week has a number:

6PtWeek = 6 Pts
5PtWeek = 5 Pts
…
1PtWeek = 1 Pt


Family decisions:
Your family decides that they want 3 vacations this next year: #1 is 4th of July in Maui, #2 is Christmas week in Vail, and #3 is Spring Break in Ft. Lauderdale; in that priority.  You must now decide which week(s) is to be used for the vacations.

4th of July in Maui is the big one and you decide to use the 6PtWeek and 5PtWeek = 11 points.

Christmas Week is a biggie too and you then use 4PtWeek and 3Pt Week = 7 points.

Spring Break (March) is no big deal so you just use 1PtWeek.

However you have the 2PtWeek left over.  You decide to add it to the Christmas Week so now you have 4PtWeek and 3PtWeek and 2PtWeek = 9 points.



On June 30, the computer looks at January of 2008 and awards the usage based upon the highest point score – ties are settled on the earliest timestamp.

On September 30, 2007 Spring Break (March) is determined and you lost your bid for Ft. Lauderdale – you still have the 1PtWeek to use – you add it to Christmas Week and now have 10 points.  The winner put up a 6ptWeek and a 1PtWeek.


Recap:
Spring 2008 – didn’t put up a strong enough week; lost reservation.

4th of July of 2008 in Maui– got the week and gave up the 6PtWeek and 5PtWeek.

Christmas Ski Week – got that too with the 4PtWeek and 3PtWeek and 2PtWeek and 1PtWeek.

Unused weeks roll forward to the next year.  Can’t borrow from next year’s usage.

You have no idea how other members are using their weeks – on the last day of the month the computer picks winners for 6 months out  and you get unused weeks back into your account.


I’m trying to KISS the process yet allow families to decide which vacations are more important than others.  If someone has some ideas please don't keep them a secret.  If not I'll be cooking up yet another reservations scheme until something "Rings a bell".


P.S.
I can see where this scheme could show everyone’s bid (without the member name).  That way you could move your weeks around and not overbid.  This would be helpful if there were multiple condos that were equal – e.g. Vail, Park City, Lake Tahoe and you really didn’t care which one you got – bid 6PtWeek for Vail, 5PtWeek for Lake Tahoe and 4PtWeek for Park City if you want.  If you see higher bids for Vail you could take that week and add it to Lake Tahoe giving 11 Pts.  You would be able to see the competitive bids up until 24 hours before the end of the month when they are removed from sight.

All these exercises are no trivial matter – just ask the Maui Marriott owner trying to get Christmas week.


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## caribbeansun (Apr 8, 2007)

You need to KISS it again!

It needs to be understandable to the average man/woman - you process things at a different level so you need to bring it back to the grassroots level of people without years of experience.

Heck plenty of people don't understand how to use II or RCI at a simple level forget the complexities added by the discussions that happen around here.


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## Steamboat Bill (Apr 8, 2007)

What price range (in taoday's dollars) do you think is the best bang for the buck?

Most DC's are going after $3-4m properties...only HCC goes after the $800k-1m range.


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## PerryM (Apr 8, 2007)

*From frugal to Trump...*

We were just watching The Apprentice, and the task tonight was to put together a sales campaign for Trump’s #2 tower in Vegas.   (Each week I ask my wife “This is the best of the best of one hundred thousand applicants?”)

Anyway a condo in Trump’s tower costs as much as a similar condo 100 yards from Ka’anapali Beach in Maui.  There is always a real estate market that folks will buy into if they think they are getting a great deal.  So I don’t think the price is the determining factor it’s the folks who would buy into a DC; they want a great deal and they will buy.

The guy who wants a $4 M condo has little interest in a $500k condo but there is a great market for each.  Heck you could put together just a Vegas DC of 50 condos from all the exciting resorts in Vegas.

If the focus is on the Marriott or Westin owner then a $75k membership fee would be fairly easy to sell.  8 * $75k = $600k for a condo and that’s exactly what would appeal to a timeshare owner at that level.  Since financing could be done with a line of credit on an existing house, there would be no need to offer financing.  The MF would be 8% of the membership fee of $75k = $6,000 per year.  The member gets 6 weeks of usage for $1k per week and real estate appreciation to boot.  This should give the Marriott/Westin timeshare owner that “Warm fuzzy feeling”.

The next step would be twice that or a $1.2 M condo and a membership fee of $150k with a MF of $12k per year or $2k per week.  The Maui Marriott owner could spend this on just 2 weeks there and a MF of almost $3k.

I’d say the next level is twice that or a $2.4 M condo and a membership fee of $300k with a MF of $24k per year or $4k per week.  We are now out of the timeshare realm and into the condo owner who doesn't want the hassles of whole ownership.

This is all 100% equity ownership with 100% return of the current membership fee when a member sells their membership back to the DC on a 2 in/1 out basis; or for whatever the market will bear.

P.S.
All of the above would be real numbers with no "Magical", slight of hand, numbers that the DC industry seems to be built on today.  "Stay at a condo worth twice as much as equity dictates - we use high finance to make all this work".


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## Steamboat Bill (Apr 9, 2007)

Trump could sell sand to a Saudi.....perhaps he should start a DC and only stay in Trump branded properties.


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## PerryM (Apr 9, 2007)

*Simple Simon Says...*

Ok, here is a Kiss system - if someone can improve upon it please speak up.

In June of each year each member gets 6 weeks added to their account; Week1—Week6.  Week1 is worth the least; in terms of “Reservation Power” it’s worth 1 Pt.  Week2 is 2 Pts…Week6 is 6 Pts.

Starting June 1 and lasting until June 30, members can use their 6 weeks to indicate their preference for next year’s reservations, 2008.  Members take their 6 weeks and assign them to weeks in 2008.  Multiple weeks can be used to indicate a very desirable week next year.  Christmas week at Maui could have Week6 + Week5 for 11 points.  Members have no idea what other members’ decisions are.

At Noon CST on June 30 has the computer awarding winners.  The member with the highest Points wins; the computer randomly pickis a winner from tie bids.  Losers get back their weeks.

Starting 1 minute past Noon on June 30, any member can bid on any open week for 2008, the next day at Noon CST a winners are chosen.  Again trading power of the week(s) put up determine the winner and ties are settled randomly.  This goes on throughout the year.

90 days before check-in has any member reserving a week for a cash price – the price is displayed for each week.  This cash is used to offset maintenance fee increases.

Any unused weeks that carry over from the last year double in value on June 1.  Weeks can be sold to other members at market prices.  A Week5 would become a Week10.  Weeks can only be carried forward 1 year.


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## smbrannan (Apr 9, 2007)

PerryM said:


> Ok, here is a Kiss system - if someone can improve upon it please speak up.



PerryM - With respect, I think the scheme I posted last week was better.

2 issues with your scheme -

One - you allow a light user of the DC (someone who wouldn't use their full allotment of weeks) to "double-up" their weeks to bid for their first choice of locations.  The violates the member equality principle.   All members first choices should have the same priority.

Two - you need someone to do allocations on a daily basis.  That's too much of an admin burden for a smallish co-op DC.   Allocations should only be done on a semi-annual, or at most quarterly, basis.

I'd be interested in other opinions.


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## PerryM (Apr 9, 2007)

smbrannan said:


> PerryM - With respect, I think the scheme I posted last week was better.
> 
> 2 issues with your scheme -
> 
> ...




The reservation process is an internet program – I have programmers who could do this.  Management has no role in this ongoing process.  (If there is a management)

If a member does not get to use their weeks from last year, either because they kept missing out on bids or simply because they could not take the reservations they should not be punished as the least and at best those weeks should carry a premium next year.  There is plenty of “slack” time built into the DC – folks deciding to pool weeks together has the net result in other members getting higher demand weeks since the original owner can’t bid on them.

I could see just adding 1 Reservation Point to carryovers, but there needs to be someway to compensate the member for unused weeks last year.


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## Steamboat Bill (Apr 9, 2007)

This thread is getting quite active and it almost seems like a blueprint for a business plan....any takers?


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## PerryM (Apr 9, 2007)

*I like it, I like it...*

Smbrannan,

I reread your plan and after spending many hours working on this problem I like your approach – with one modification!

The area I’m trying to address is the member who only has 2 or 3 vacations and should be able to use the unused weeks to bolster their vacation chances they are trying to reserve.  If they only have 3 choices, each choice should be comprised of  multiple weeks.  Slightly modifying your method results in this:

Each member has up to 6 choices of vacations per year; Choice#1, Choice#2…Choice#6.  A member fills in the following information for each choice:

Condo
Week
Number of weeks deposited (1 minimum)


Here’s how our family decided:
Choice#1: Whistler, Week51, 2 weeks
Choice#2: Maui, Week26 (4th of July), 2 weeks
Choice#3: Whistler, Week7, 2 weeks

Exactly at Noon on June 30, the computer picks winners for Choice#1.  The number of weeks deposited is now considered.  Ties are randomly settled.  If a member does not get their 1st Choice, then their 2nd choice becomes choice #1 and the program goes thru again until all 1st Choices are satisfied and then Choice #2 starts the same way.

The program remembers that Choice#1 was never satisfied for this member and internally a flag is set for next year (Actually a counter with the number 1 in it now).  Next year’s round will look for members who did not get their Choice#1 and they will be considered first.  If that year did not get Choice#1 then the counter goes up by 1 to 2 for next year’s choices.  The same goes for Choice#2,#3..#6.

Unused weeks carry forward 1 year.

P.S.
When deciding which member is to get a week, all the folks in the running each get a “Lottery Ticket” and if you deposited 2 weeks you get 2 lottery tickets.  (This is how it would be handled in a program).  So just because a member put up 2 weeks does not mean that they are in a special category – just more lottery tickets.  If they win, all weeks deposited for that choice are removed from their account.


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## Noelle (Apr 9, 2007)

Thanks Greg and Perry,

I would never have guessed 'Destination Club' so thanks for clarifying and providing the very informative link to the Helium Report..... Noelle


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## smbrannan (Apr 10, 2007)

PerryM

I think your suggestion could work.  It allows for members who won't use their full allotment of weeks to have some benefit in trying to get the weeks that they really do want.  The benefit might be very slight...for example if 10 members want Christmas week at a ski location, and one member puts up 3 weeks, while everone else puts up one week.  That means that the chances of winning the week have gone from 1 in 10 to 3 in 12, but it doesn't guarantee that the member bidding 3 weeks would win.  I like that because one concern I have is that some rich guy buys a membership in the co-op DC and then uses all their weeks to get Christmas at a prime location every year.


One potential problem is that I think most people, if they are working stiffs like me, will only be able to use 2 or 3 weeks a year.  That means that they will probably bid 2 or 3 weeks for every reservation.  In effect this means that there will be an automatic "inflation" in the number of weeks bid for each reservation.  Bidding one week might be the exception rather than the rule and therefore would put you at a, slight, disadvantage.

I still think my original approach could work a bit better, because it has a strict heirarchy of choices (first, second, third etc.), while still compensating members who don't get the weeks they want by giving them a superpriority in subsequent allocation.  

But both approaches could work.

Cheers,

Stuart


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## caribbeansun (May 19, 2008)

*Something worth revisiting*

I thought I'd dust off this thread from a year ago and include "new" data for something I'm working on:


full participation in the underlying properties (management company takes 2.5% ownership for services rendered)
each property in a separate legal entity with reciprocal trading rights
two pools of properties - 100% vacation and 100% investment
vacation buyers can rent from investment buyers for 50% of market rental rate
investment buyers can exchange time with vacation buyers by paying 50% of the market rental rate for their home property
members can sell their interest at any time with one restriction - right of first refusal to other owners of the property (no fees)
properties worth between $800k - $1.2M,
no leverage whatsoever,
buy in is approximately $100k depending on home property
proportionate share of strata, insurance, administration, etc. estimated to be $5,000 or less per owner
4 weeks access annually
Owners are free to trade allocated weeks amongst the group in any manner they see fit
can purchase additional nights for $125 (roughly annual costs/365)
a 10:1 member to property ratio
properties will be located in resort complexes not individual homes in order to access amenities
reservation system will be a modification of smbrannan's as follows:
Every six months and one year in advance each owner will designate 3 weeks as their first, second and third choice. The 3rd choice would only be used if owners failed to have their top two choices fulfilled.

Management will review the first choices of all owners.  If there aren’t any conflicts every owner will receive their first choice.  If two or more owners have chosen the same week as their first choice, one owner is chosen based on their rank (as determined by the date of their commitment to the purchase – this will change with each selection period so that all owners will have a priority reservation on a regular basis).

For the owners who didn’t get their first choice, their remaining choices are bumped up by one. (i.e. their original second choice, becomes their first choice and so on). This process is repeated, until all owners’ choices have been satisfied, to the greatest extent possible.

If someone has weeks left at the end of this process, they can either designate them as super-priority weeks during the next allocation process or simply chose an alternative week from those remaining. In the allocation process a super-priority week trumps someone else’s first choice.

Management will track holiday week usage by owner and in the event of a tie between owners selecting holiday weeks the owner with the lower prior usage will be awarded the week.  If prior usage is equal the tie breaker will be as determined above.  The reason for this is to ensure that all owners have equal access to holiday weeks.

Any additional nights rented by owners will be used to off-set annual strata costs.​Would anyone have any interest in something like this?


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## Steamboat Bill (May 19, 2008)

I would be interested.

FYI- there is a "new" club that may be very close to what you are looking for.

Check out Equity Estates:
http://www.destinationclubforums.com/f37/


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## zmisst (Jun 26, 2008)

I like most of that except:


* each property in a separate legal entity with reciprocal trading rights

What does that mean?  Ownership could be in a seperate legal entity with a a holding company that owns all the subs (or like series LLC company).  An Interest in the holdco could have the rights of use. 


* two pools of properties - 100% vacation and 100% investment

Why? seems unecessarily complicated, just buy homes that are good buys for vacation that are also good bets as a long term investment. 


* no leverage whatsoever,

This seems naive.  The ability to mortgage real estate is a great source of inexpensive capital.


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## caribbeansun (Jun 27, 2008)

zmisst said:


> * each property in a separate legal entity with reciprocal trading rights
> 
> What does that mean?  Ownership could be in a seperate legal entity with a a holding company that owns all the subs (or like series LLC company).  An Interest in the holdco could have the rights of use.



It would allow people to invest in select properties not all of them however allow them to access other properties in the porfolio.



> * two pools of properties - 100% vacation and 100% investment
> 
> Why? seems unecessarily complicated, just buy homes that are good buys for vacation that are also good bets as a long term investment.



Investment = rental properties with some vacation usage
Vacation = no rental whatsoever with 100% vacation usage



> * no leverage whatsoever,
> 
> This seems naive.  The ability to mortgage real estate is a great source of inexpensive capital.



Naive - hardly.  The lack of leverage ensures that owners underlying investment is secure.  Those that want to use leverage are free to do so by virtue of their own HELOC's.  One of the biggest issues within the DC industry is the over leveraging of club assets such that the member's deposit is effectively at risk.


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## zmisst (Jun 27, 2008)

I'd rather invest/fund a club that allowed to me own a piece of all the vacation properties  portfolio (and thereby diversify the risk of any individual property having a problem.). 

Not having a mortgage doesn't mean that the underlying investment is "more secure".  In fact just the opposite -- it means you have to put a lot more money at risk: your potential downside is even greater.  

There is a difference between "overleveraging" and using debt responsibly.   Someone averse to the former, shouldn't also be afraid of the latter. 

And bottom line, without debt, the equity buy in would likely be cost prohibitive to too many people.   

But enough of the differences, I'm still very interested in a vacation club that is essentially owned by the members: like a credit union, a mutual insurance company, a farmer's (or REI) co-op.  

By leaving out the traditional equity backer/promoter who wants to maximize their profits interest (at the expense of the members: who else?) a very reasonably priced vacation club wth very sensible terms for its members could be created.  

There could still be a mgt company, employees and other service providers and they could all be compensated at mkt prices for the value of their services rendered, but any excess profits of the enterprise would go back to the members in the form of keeping fees low instead of to the original promoter.

Instead of building a whole big operation from scratch, think about it in smaller terms, in its essence.  A handful of families that have their own roughly equal vacation homes get together and agree to all contribute their homes (or at least their equity interest in the homes which would usually be sensibly debt financed) into a partnership and agree that as partners they can share all the homes in an organized way, including contributing the money they would usually pay for expenses for their home to the partnership to pay for expenses for all the homes.   Some new members are added for an appropriate buy in, and the partnership buys more houses.  The partnership also provides other services (through a mgt company who is compensated only for services provided) to the members as they request and pay for through their dues (e.g., organizing their vacations, decorating the homes,  etc.).

And the members own all the equity in, and thereby capture all the appreciation of,  the real estate.


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## caribbeansun (Jun 28, 2008)

Fair points on leveraging - the debate also will swing back to the exposure a group has (at least when the #'s are smaller) of the non-paying member and the associated risk with that.

Personally, I always use leverage for investment purposes because being able to deduct the interest makes it very cheap capital as you already said.  I have a difficult time using leverage for what I consider to be non-investment and non-deductible assets ie. a vacation home.

The group contributing their homes is something I've discussed with others and have practiced to some degree although not to the extent you've detailed.  I suspect it would be more difficult to convince people to put their properties into a communal pot although I've not attempted to organize that.


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## zmisst (Jun 28, 2008)

caribbeansun said:


> The group contributing their homes is something I've discussed with others and have practiced to some degree although not to the extent you've detailed.  I suspect it would be more difficult to convince people to put their properties into a communal pot although I've not attempted to organize that.



I intend the story about the contribution of properties merely as a thought experiment to illustrate the end result: a partnership/club where the partners/members own the equity and share the properties and pay the  expenses (viz mgt company etc).

You could have the same end result without a contribution of property, but rather a contribution of money (the equity buy in) and the club goes out and buys the properties.


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## TarheelTraveler (Jun 30, 2008)

zmisst said:


> I intend the story about the contribution of properties merely as a thought experiment to illustrate the end result: a partnership/club where the partners/members own the equity and share the properties and pay the  expenses (viz mgt company etc).
> 
> You could have the same end result without a contribution of property, but rather a contribution of money (the equity buy in) and the club goes out and buys the properties.



I had previously thought of doing the same and think it's a great idea.  However, I had a hard time finding enough people who were serious enough about doing it and who could agree on location(s) and level of properties.  It seems like everyone had a different idea of what was ideal in the way of properties, so I found the closest DC to what I wanted (which was Crescendo, now A&K Residence Club).  As Steamboat Bill pointed out, Equity Estates is also similar in nature.  Obviously, you're paying a fee to someone else to bring in members, but the upside is you end up with more properties than a do-it-yourself DC.


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## caribbeansun (Jun 30, 2008)

What I'm finding are the biggest trade-offs to this are as follows:

- you don't get "true" equity participation (everyone lops off a huge chunk for themselves leaving little for you even though it's your capital at risk)

- finding the "right" value properties.  So many of the clubs are at a price point I just don't need and to pay for what I don't need doesn't really make sense to me ALTHOUGH it may "force" us to travel with family more or friends more which can either be a good thing or not.

- annual costs tend to be over the top relative to your cost of ownership IF you can find a place with reasonable rental pool rules.  I've seen all the projections and bogus calculations the DC's throw out and they just aren't realistic compared to finding say 6-8 people to buy a unit on your own.


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