# Starting My Own Destination Club



## GOLFNBEACH (Sep 26, 2007)

OK...let's look at this crazy idea.

I have been looking into DCs over the past few weeks (mostly HCC and PE/UR).  I love the concept - but I keep thinking the membership probably doesn't fit my usual travel plans.  I have concerns over the security of my initial deposit.  I also hate to put significant cash into anything that does not appreciate in value.

I live in New England and we love the area.  I like to take a lot of long weekends skiing at Stowe/Sugerbush (VT), playing golf at New Seabury (Cape Cod), summer evenings dining in Newport (RI), etc.  Simply put, I want great driveable destinations for short trips, plus a handful of great destinations for longer trips (Florida, Cabo, OBX, Kiawah, etc.). 

What if I buy a 2-3 bedroom condo in one of the places I mentioned ($800K range).  I get a half dozen friends to buy condos in other locations.  We hire a lawyer and draw up the DC documents.  Start with founders pricing at say $75K.  Plan on 7 members per property.  Every time a new member joins the fee is split between the partners.  

OK...I'm taking an approach that seems to be working for other companies.  The real estate market is soft so I gotta belive there are some real values out there.  

Thoughts?


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## Steamboat Bill (Sep 26, 2007)

Great idea...but why should I trust you with my $75k instead of HCC, PE/UR that offers me MORE properties and greater value (some properties are $1.5m or more)


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## NAL (Sep 26, 2007)

I agree with Steamboat Bill. I think you will find it harder then you think unless all you sign on are friends. 

I do know a lot of people around my area are starting to buy Napa homes together as a shared TIC and I'm considering this myself. However, once you get more than 4 people in on it (i.e. one weekend each), I think it becomes harder because most people want frequent weekend use if it is in close driving distance.


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## LTTravel (Sep 26, 2007)

NAL said:


> I agree with Steamboat Bill. I think you will find it harder then you think unless all you sign on are friends.
> 
> I do know a lot of people around my area are starting to buy Napa homes together as a shared TIC and I'm considering this myself. However, once you get more than 4 people in on it (i.e. one weekend each), I think it becomes harder because most people want frequent weekend use if it is in close driving distance.



As in Animal Farm, you will find "All animals are equal, but pigs are more equal than other animals."


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## vivalour (Sep 26, 2007)

GOLFNBEACH said:


> OK...let's look at this crazy idea.
> 
> I have been looking into DCs over the past few weeks (mostly HCC and PE/UR).  I love the concept - but I keep thinking the membership probably doesn't fit my usual travel plans.  I have concerns over the security of my initial deposit.  I also hate to put significant cash into anything that does not appreciate in value.
> 
> ...



Sounds like a perfect fantasy -- I would love to participate -- but not in the real world.  Real estate partners (pun not intended) can be a nightmare -- I have been there --and often one or a group are left holding the bag when others have to bail out for one reason or another.  Then the dream evaporates along with the cash....

We have even entertained the idea of buying 1 or two properties with 1 or 2 other families but it just gets too complicated. Can easily turn what should be a fun thing into a royal pain! But hey, let's see what other ideas this provokes!


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## Dave M (Sep 26, 2007)

You'll also need to determine the state laws for the offerings you propose, hire someone to handle reservations and paperwork, pay for accounting services for the financial aspects, make plans for how you will arrange for upkeep, repair, cleaning, pool maintenance and the other ownership aspects of each property, etc. 

If you trust each of your friends to do the paperwork and manage arranging and paying for operating expenses, sooner or later you'll have a problem and a resulting legal mess. You'll need a legal entity to protect the assets (including annual fees) from any individual partner who might stray.

Splitting the initial fees among partners might be a problem. Much (most?) of those fees will likely go to pay for purchasing the properties or retiring the debt incurred to do so. Also, how will $75k per partner pay for the purchase of the properties if you have only seven partners per property? (7 X $75,000 = $525,000 = a lot less than your projected average $800,000 cost per property.)


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## Steamboat Bill (Sep 26, 2007)

I would ONLY suggest starting a DC with 10 or more properties as anything less is just too small.

Thus, 20% of ten $1m homes = $2,000,000 starting cash....that could be a problem for many people.


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## travelguy (Sep 26, 2007)

vivalour said:


> Real estate partners (pun not intended) can be a nightmare -- I have been there --and often one or a group are left holding the bag when others have to bail out for one reason or another.  Then the dream evaporates along with the cash....



Very True!!!


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## Tedpilot (Sep 26, 2007)

I think if you were serious you might want to chase another economy of scale.  Right now HCC is king for value - tough to compete unless you come well prepared, educated and armed (i.e big cash/no debt on properties).  What is to say that there is not a possible market for homes in the $500k neighborhood?  What about applying this model to a different need such as business travelers that would like something more than a hotel room ($100/night) but less than a suite ($500/night) - in the $200 range you could have some nice two bed condos and townhomes?  As a bonus you float a few nice vacation spots in the mix to attract the right customers.  

Ted


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## GOLFNBEACH (Sep 26, 2007)

Steamboat Bill said:


> Great idea...but why should I trust you with my $75k instead of HCC, PE/UR that offers me MORE properties and greater value (some properties are $1.5m or more)



My focus would be on drivable destinations for people in New England with additional winter escapes.  This is a huge market.

I assume HCC started much the same way with a focus on ski properties out west.


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## GOLFNBEACH (Sep 26, 2007)

vivalour said:


> Sounds like a perfect fantasy -- I would love to participate -- but not in the real world.  Real estate partners (pun not intended) can be a nightmare -- I have been there --and often one or a group are left holding the bag when others have to bail out for one reason or another.  Then the dream evaporates along with the cash....
> 
> We have even entertained the idea of buying 1 or two properties with 1 or 2 other families but it just gets too complicated. Can easily turn what should be a fun thing into a royal pain! But hey, let's see what other ideas this provokes!



That is what a business plan, partnership agreement and lawyers are for.  Every DC has to start somewhere.


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## GOLFNBEACH (Sep 26, 2007)

Dave M said:


> You'll also need to determine the state laws for the offerings you propose, hire someone to handle reservations and paperwork, pay for accounting services for the financial aspects, make plans for how you will arrange for upkeep, repair, cleaning, pool maintenance and the other ownership aspects of each property, etc.
> 
> If you trust each of your friends to do the paperwork and manage arranging and paying for operating expenses, sooner or later you'll have a problem and a resulting legal mess. You'll need a legal entity to protect the assets (including annual fees) from any individual partner who might stray.
> 
> Splitting the initial fees among partners might be a problem. Much (most?) of those fees will likely go to pay for purchasing the properties or retiring the debt incurred to do so. Also, how will $75k per partner pay for the purchase of the properties if you have only seven partners per property? (7 X $75,000 = $525,000 = a lot less than your projected average $800,000 cost per property.)



Obviously I would need to hire help as the business grows.  This is expected.

In regards to the property values I would have some debt leverage like most DC do.


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## GOLFNBEACH (Sep 26, 2007)

Steamboat Bill said:


> I would ONLY suggest starting a DC with 10 or more properties as anything less is just too small.
> 
> Thus, 20% of ten $1m homes = $2,000,000 starting cash....that could be a problem for many people.



Gotta start somewhere but 10 would be a nice goal.  My thought was that I would start with 6 partners and each partner would put up equity to buy initial properties.


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## GOLFNBEACH (Sep 26, 2007)

Tedpilot said:


> I think if you were serious you might want to chase another economy of scale.  Right now HCC is king for value - tough to compete unless you come well prepared, educated and armed (i.e big cash/no debt on properties).  What is to say that there is not a possible market for homes in the $500k neighborhood?  What about applying this model to a different need such as business travelers that would like something more than a hotel room ($100/night) but less than a suite ($500/night) - in the $200 range you could have some nice two bed condos and townhomes?  As a bonus you float a few nice vacation spots in the mix to attract the right customers.
> 
> Ted



As stated in another thread my niche would be drivable properties from New England along with winter getaways.

I have no idea if the business travelers idea would work but I have no desire to look into that concept.  When I travel on business location and convenience are the key factors.


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## GOLFNBEACH (Sep 26, 2007)

NAL said:


> I agree with Steamboat Bill. I think you will find it harder then you think unless all you sign on are friends.
> 
> I do know a lot of people around my area are starting to buy Napa homes together as a shared TIC and I'm considering this myself. However, once you get more than 4 people in on it (i.e. one weekend each), I think it becomes harder because most people want frequent weekend use if it is in close driving distance.




Excellent point.  I really need to think this through.  I was originally thinking 7 members per property however maybe this is too much.


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## smbrannan (Sep 26, 2007)

golfnbeach

TUG member caribbeansun has been working on something like this since last winter.

Last I heard is that he expects to have a proposal sometime this fall.  

Suggest you send him a PM to see where things are at.


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## Kagehitokiri (Sep 26, 2007)

> TUG member caribbeansun has been working on


 >

http://www.tugbbs.com/forums/showthread.php?t=44279
http://www.tugbbs.com/forums/showthread.php?t=33840

personally, for me to consider something like this it would require beachfront and ski-in/ski-out single family homes. in whatever locations they could be acquired. urban locations would need to have reasonable 2BRs.


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## NeilGoBlue (Sep 27, 2007)

*Here's how to start...*

How you start is have you and your friends each buy a home in different areas.  They buy a home where they feel comfortable incase it doesn't work out.  Then you just share your homes with some agreement.

I've entertained the idea of starting a car club this way. 

I buy a ferrari
Friend one buys a lamborghini,
Friend two buys a porsche
Friend three buys a rolls
Friend four buys a maybach

We then 'lease' the cars to the club... if the club falls apart, we just take the cars back.. what' the worse that happens?  I have a ferrari.


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## vineyarder (Sep 27, 2007)

If you're serious, I hope that you've given serious thought to the hassle factor, and whether the potenial financial reward/savings is worth the headaches involved!  

At one time I owned 4 vacation homes, in addition to my primary residence, and it seemed that I was on the phone every day with one caretaker or another, dealing with various repairs/problems... and then when we would arrive at a home for a vacation, despite having a caretaker, there would inevitably be annoying issues that arose, such as smoke detectors 20 ft above the floor that start beeping in the middle of the night due to low battery... or instant hot water dispensers that leak... or the car wouldn't start... or the sheets smelled musty... and then no daily maid service, no stocked refrigerator, etc.  Sold off 3 of them, and now the experience makes me appreciate DC vacations all the more having experienced all these headaches!  

Perhaps another way for you to start is to just buy a vacation home (Stowe or New Seabury) that you could easily rent out when you aren't using it, and use the rental income to fund your other vacations to Newport, OBX, FL, Cabo, etc... Then you can see if, for you, the headaches are worth the equity.


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## GOLFNBEACH (Sep 27, 2007)

NeilGoBlue said:


> How you start is have you and your friends each buy a home in different areas.  They buy a home where they feel comfortable incase it doesn't work out.  Then you just share your homes with some agreement.
> 
> .



Yes, this is how I envision the club would work.  It's all relatively simple and there are plenty of good ideas to copy and knowledge of what to avoid.


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## Steamboat Bill (Sep 27, 2007)

vineyarder said:


> Sold off 3 of them, and now the experience makes me appreciate DC vacations all the more having experienced all these headaches!



I 100% agree and that is why DC are getting so popular.

I also like the car idea, but you must have a 100% trust of your friends for this to work.


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## LTTravel (Sep 27, 2007)

*Don't do business with friends. They will not be friends for long!*


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## vivalour (Sep 27, 2007)

LTTravel said:


> *Don't do business with friends. They will not be friends for long!*



Or family, I could add. I  have seen it first-hand -- and esp. with family, it can be UGLY. Greed always gets in the way.


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## Steamboat Bill (Sep 27, 2007)

OK....I will also agree that doing business like this with familiy or friends can spell trouble.

On the other hand....who else are you going to trust?


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## LTTravel (Sep 27, 2007)

Steamboat Bill said:


> who else are you going to trust?



*Trust noone, get it in writing with a legal document. I have learned this first hand.*


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## travelguy (Sep 27, 2007)

*A bad time to start a DC?*

IMHO - Understanding that a DC's profit is based on property appreciation as much as equity paydown and that the current travel property market is at best stable, and probably depreciating in many markets, now would be a bad time to start a DC.  Unless of course you think that we've hit bottom and prices will soon start to rise.  

That of course is what RISK is about in business and you should understand that starting a DC is a BUSINESS that has inherent and continuous RISK unlike purchasing a DC membership where the risk can be accessed upfront through due diligence.  Post DC membership purchase is a time of vacationing enjoyment knowing that you've made a throughly researched and valid decision.

Life is too short to apply RISK to LEISURE time!  

P.S. - I agree with all the other stuff about not doing biz with friends, relatives, strangers, the government, etc.


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## abc31 (Sep 27, 2007)

Why not just buy the property and when you want to go somewhere else do a house swap.  There are agencies that handle this.  My friends spent all of last summer in Europe through house swapping.  She used her permanent residence to swap.  That would make me feel a little uncomfortable, but if you did it with your vacation home, you wouldn't have to worry about another family having access to all of your personal belongings.


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## Steamboat Bill (Sep 27, 2007)

I don't want strangers staying in my house. A DC is a club that members have a vested interest in taking good care of their property.


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## vivalour (Sep 27, 2007)

LTTravel said:


> *Trust noone, get it in writing with a legal document. I have learned this first hand.*



You may trust them, but their spouse, in-laws or boss, for example, may exert some pressure behind the scenes. Then suddenly they undergo a radical personality change. 

It happened to my uncle (my father's business partner) and one of my past business partners. Quite amazing how these likeable, bright people suddenly undergo a transformation under the influence of a strong-minded "other". 

IMHO it's human nature and sometimes we can be lucky with partners, sometimes not. Even within a legal framework the outcome can be quite miserable!


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