# Creating your own timeshare



## Elan (Aug 21, 2010)

Has anyone gone together with other families and purchased vacation property?  I've had the discussion of doing just this with some friends and work colleagues numerous times, but we've never gone beyond that.  Now that condo prices are down considerably in the resort town that's a couple hours from home, we've talked a bit more seriously.  Anyone done such a thing, and if so, how is it working out?


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## DaveNV (Aug 21, 2010)

I have a friend who owns a condo in Puerto Vallarta.  He visits and stays in the unit for about four months a year.  The rest of the time is rented out weekly by the management company that owns the building, with my friend getting a cut of the money.  

Not exactly a timeshare, but sort of like one.  You may want to see if you could work a similar deal, and use a vacation management company to handle the unit when you didn't want to be there.  My friend makes enough as his share of the rental money that his vacation time is free to him, and the condo payments are made by the renters.  It's a pretty sweet deal.

Dave


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## Elan (Aug 21, 2010)

BMWguynw said:


> I have a friend who owns a condo in Puerto Vallarta.  He visits and stays in the unit for about four months a year.  The rest of the time is rented out weekly by the management company that owns the building, with my friend getting a cut of the money.
> 
> Not exactly a timeshare, but sort of like one.  You may want to see if you could work a similar deal, and use a vacation management company to handle the unit when you didn't want to be there.  My friend makes enough as his share of the rental money that his vacation time is free to him, and the condo payments are made by the renters.  It's a pretty sweet deal.
> 
> Dave



  Yeah, that's a great deal, and an idea I've contemplated.  Unfortunately, the rental market in my area of concern is saturated, even in good times (because lots of people do what your friend does).  So to rent out a unit, you have to either have the lowest rental price, or lower the rental requirements, neither of which is that desirable of an option to me.


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## Talent312 (Aug 21, 2010)

With enuff friends, family or other investors, it might be possible to put together a trust or partnership for the purpose of acquiring an individual condo, and share its use in assigned slots, but there'd need to be an agreement as to its management.


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## BevL (Aug 21, 2010)

I personally wouldn't touch something like that with a 10-foot pole unless I was in it with people I didn't really care about.

We've had the opportunity to buy into a deal like that - a place in Palm Springs where everybody takes two months - one month at a time - and rotates throughout the year.  Last we heard, there were some family members and former close friends who weren't speaking to each other over the fact that one of the couples divorced, didn't want to participate and basically threw up their hands and said, "Not our problem, sue us."  Then of course, somebody has to take over those fees - some didn't want to - well, you get the idea.  We were so happy we hadn't gotten involved.

So while I think the concept is good, the human element could be difficult.


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## Ridewithme38 (Aug 21, 2010)

I've thought about this...But every area has undesirable times...What if you and a friend want to stay at the same time? Who's going to take the less desirable times?


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## Elan (Aug 21, 2010)

BevL said:


> I personally wouldn't touch something like that with a 10-foot pole unless I was in it with people I didn't really care about.
> 
> We've had the opportunity to buy into a deal like that - a place in Palm Springs where everybody takes two months - one month at a time - and rotates throughout the year.  Last we heard, there were some family members and former close friends who weren't speaking to each other over the fact that one of the couples divorced, didn't want to participate and basically threw up their hands and said, "Not our problem, sue us."  Then of course, somebody has to take over those fees - some didn't want to - well, you get the idea.  We were so happy we hadn't gotten involved.
> 
> So while I think the concept is good, the human element could be difficult.



  That part is not even a remote concern here.  Sure, it's always a possibility, but I'm confident that I know the others well enough that it's not going to happen.  Furthermore, all of the likely "ugly" scenarios would be hashed out and their resolution signed off on by all participating parties before the property was purchased.


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## Elan (Aug 21, 2010)

Ridewithme38 said:


> I've thought about this...But every area has undesirable times...What if you and a friend want to stay at the same time? Who's going to take the less desirable times?



  This is a summer and winter resort area, with dead times in the fall and spring.  But I'm talking anywhere from third to fifth share ownership here, so supply of time will far exceed demand, and the unit will be empty far more than it's occupied.  Prime time (holidays, etc) would rotate through the ownership, just as it does elsewhere.  

  I should clarify that the context of such a deal has become as much about "investment with usage" versus "usage with possible ROI".  In other words, most of us think it's a good time to buy in terms of long term appreciation, whether we actually use the unit or not (but we will).


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## Passepartout (Aug 21, 2010)

Jim, we've thought about this, too, and have a pretty good idea where you are thinking about. I've lived there, and 'mud season' is long!

The attorney who lives with your humble corespondent advises that anything like this be entered into just like a business partnership with clearly defined rules of use, payment, succession, responsibility and more.

Jim Ricks


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## Sea Six (Aug 21, 2010)

I know people who tried this. It went well for a few months. Then, they fought about who gets which prime holiday weeks. Then, they fought about who actually used it more, because some did more than others. Then, they fought about who broke what, and who should pay to replace it. Then, some owners thought it would be OK to let their teen/20 kids use it once in a while. Then the lawyers got involved.


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## Elan (Aug 21, 2010)

Passepartout said:


> Jim, we've thought about this, too, and have a pretty good idea where you are thinking about. I've lived there, and 'mud season' is long!
> 
> The attorney who lives with your humble corespondent advises that anything like this be entered into just like a business partnership with clearly defined rules of use, payment, succession, responsibility and more.
> 
> Jim Ricks



  Each participant would likely use the unit for a week in the summer, a week in the winter and the occasional long "get me outta the rat race" weekend throughout the year.  I don't foresee much off-season usage.

  There will definitely be a legal document that details rights, succession, etc.  Although one can't foresee every scenario, we've discussed most of the obvious ones.  Under no circumstances will any of this be pursued without a binding document in place beforehand.


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## Elan (Aug 21, 2010)

Sea Six said:


> I know people who tried this. It went well for a few months. Then, they fought about who gets which prime holiday weeks. Then, they fought about who actually used it more, because some did more than others. Then, they fought about who broke what, and who should pay to replace it. Then, some owners thought it would be OK to let their teen/20 kids use it once in a while. Then the lawyers got involved.



  Sounds like they didn't put much thought into it beforehand.  Usage of time is one of the easier things to work out.  Each participant should be fully aware of what their entitled usage is when they sign on the dotted line, just like a normal timeshare.


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## MelBay (Aug 21, 2010)

We had this discussion with 4 other couples we run around with.  We decided that 30+ years of great friendship was worth more than a misunderstanding over an unpaid light bill or property taxes or something similar.


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## 1950bing (Aug 21, 2010)

It sounds like a good way to get rid of your friends.


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## Patri (Aug 21, 2010)

I also think it will cause more problems than any benefits accrued. My parents bought an apartment building with their best friends. Worked out for MANY years. Then the other guy got sick, my parents offered to buy them out, the other couple's kids refused to let her, somehow thinking my parents would come out ahead financially. Truly, both couples want to be out of the deal but the other lady is listening to her kids, and her husband has alzheimers.


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## Kay H (Aug 21, 2010)

Bad idea.  I know of several long time friendships ending over similar situations.  No one plans ahead for a divorce or bad health or bad finances, but sh** happens.  Then the trouble begins.

Sorry this is not what you want to hear.


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## Timeshare Von (Aug 21, 2010)

Not me, but my ex's parents and his FIL's business partner bought a condo in Ocean City, MD and used it between their families to include the kids, etc.  They seemed to make it work but then again, it was only two "partners" in ownership . . . and not several.  The more you add to the mix, I believe the potential for issues grow exponentially.  Not worth it to me either.


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## BocaBum99 (Aug 21, 2010)

Buying a condo with friends amounts to losing friends and gaining enemies.  I wouldn't do it unless you were the general partner and they were the limited partners.  My parents did it with 2 of their closest friends.  Mistake.... Huge mistake.


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## Elan (Aug 21, 2010)

BocaBum99 said:


> Buying a condo with friends amounts to losing friends and gaining enemies.  I wouldn't do it unless you were the general partner and they were the limited partners.  My parents did it with 2 of their closest friends.  Mistake.... Huge mistake.



  What happened?


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## Makai Guy (Aug 21, 2010)

Are you too young to remember I Love Lucy?   Every time Lucy and Ricky tried to do anything with Ethyl and Fred, it ended in a disaster.


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## am1 (Aug 21, 2010)

Better for each to buy a condo in a different area and let each other use them the odd time that they want them.  Rent out the excess time through a management company.   

Your idea in theory is great but a fractional ownership would work better.


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## glypnirsgirl (Aug 21, 2010)

I have not done this with vacation property, but I did do it with commercial investment property. 

First, we got the group together. I was one of the last ones invited in. There were a total of 12 investment units. I had a full unit. Some investors had 1/2, some had 2. We chose the property in which we were investing and did a purchase and cost analysis. We figured out the loan amount, taxes, insurance and extra for refurbishing (we were rehabilitating property and the refurbishment was the most significant costs). 

We formed a corporation and the initial investment in the corporation was substantial, but not hideous, about $5000 per investment unit. Most of the initial investment was used for the down payment on the property, the balance was placed into reserve. We knew what the monthly payment was on the loan before investing and we agreed that we would each put an exact dollar figure in each month as our contribution. The monthly contribution amount was sufficient to pay the mortgage, interest, insurance and the amount that we believed would be sufficient for reserves.

All of us were professionals and none of us received compensation for our services. I did the legal documents. One of the other investors was a CPA. One had commercial property rehabilitation experience and she dealt with the contractors, etc. That part was agreed to upfront. 

It worked really well. We paid our down payment. Paid our monthly payments each month. After about 8 months, we had our first renters in the first property and continued to make our monthly contributions. We deposited the rent and the contributions into the same account and after a few months, we had sufficient down payment to invest in a second property. We had a meeting of all of the shareholders and agreed (all but one investor who sold her unit to her sister for the payments she had paid in - so at no profit - but that was their agreement) to purchase a second property. Because we were rehabilitating commercial property, the rest of us believed that rehabilitating the property that needed it the worst that was close to the first property would be mutually beneficial. And we bought the second property and continued to make the monthly payments for another 8 months until we got the property ready to rent and it sat vacant, but ready for awhile. We got it rented it out eventually, but not for sufficient to pay the costs in full, so we continued to make monthly payments.

The original idea had been to contiue to buy property and rehabilitate it in the same commercial neighborhood until we had rehabilitated the whole neighborhood either by ourselves or that other investors got inspired. 

The second building developed problems with the roof due to the age of the building that were not covered by insurance and were extremely expensive to repair. We basically got hit with a special assessment for the roof - an additional capitalization requirement in corporate speak. The roof damage caused our tenant to move out legitimately because it interfered with the business use of the property. So, we were out the money for the repairs and not receiving rent. So we continued to make monthly contributions. Eventually we got the roof repaired and got the property rented and continued to make payments to the capital account for a few more months. I made capitalization payments for almost three years before we could stop making contributions. 

Eventually, the rents were enough to cover the expenses and to make capital reserves. After we had a lot of money in the reserve account, two units wanted to sell the buildings and cash out the reserves. The remaining investors (I was one of them) agreed to buy out those two units and own a 1/10th interest instead of a 1/12th interest. We had a professional appraiser appraise the value of the building and we figured out how much equity the corporation had (equity in the buildings plus the reserves) and used that as the value of the units. What we neglected to take into consideration was the investment risk. Oh, well. 

The remaining 10 units, owned by a total of 8 investors, continued to participate in the original concept for a period of time that outlasted my first marriage (a total of 17 years, 11 years in the investment) and the period of my divorce (9 years). Shortly after my marriage to Ian, the original master mind of the concept died. Most of the other investors were well into their 70s and decided it was time to divest. We sold all of the properties (a total of 4 accumulated over the years) and split the proceeds. I recovered my initial investment and the capitalization payments that I had paid over the years. The profit was modest about 6K per investment unit. Not much, but only subject to capital gains tax.

I was glad that I had done it. We were able to get along throughout the entire process. I was the youngest of the investors at 29 when we started, and 50 when we divested. It was a great experience. It was mainly great because the women involved were all very congenial, dependable and smart. It worked great!

elaine


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## Elan (Aug 21, 2010)

Just a general comment:

  While I appreciate everyone's deep concerns for my friendships  , and you may ultimately prove to be correct that this concept is not worth pursuing, I need to hear more than opinions and anecdotal tales of woe to convince me that there are issues that can't be overcome with enough foresight and legal expertise.  I'd love to hear why some of these partnerships failed as that would be beneficial in avoiding the same issue(s) should we decide to move forward.


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## Elan (Aug 21, 2010)

glypnirsgirl said:


> I have not done this with vacation property, but I did do it with commercial investment property.
> 
> First, we got the group together. I was one of the last ones invited in. There were a total of 12 investment units. I had a full unit. Some investors had 1/2, some had 2. We chose the property in which we were investing and did a purchase and cost analysis. We figured out the loan amount, taxes, insurance and extra for refurbishing (we were rehabilitating property and the refurbishment was the most significant costs).
> 
> ...



  Elaine, thanks for the detailed and helpful response.  

  Were there ever issues that arose where the partners could not agree on a solution?  If so, how were they handled?


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## BevL (Aug 21, 2010)

Elan said:


> Just a general comment:
> 
> While I appreciate everyone's deep concerns for my friendships  , and you may ultimately prove to be correct that this concept is not worth pursuing, I need to hear more than opinions and anecdotal tales of woe to convince me that there are issues that can't be overcome with enough foresight and legal expertise.  I'd love to hear why some of these partnerships failed as that would be beneficial in avoiding the same issue(s) should we decide to move forward.



Well, in my tale of woe, basically it came down to some of the group wanted to pursue legal action, some didn't.  At least one of the "I want to go after them" parties basically threw in the towel and refused to hold up their share of expenses PLUS the additional share of expenses of the defaulting party, which created more problems for those who wanted to salvage what they could so were chipping in extra money.  So in the end, everybody kind of ended up upset at everybody else.

While I do know legal advice was obtained in preparation of the original agreement (one lawyer prepared and others had to obtain independent legal advice as they wanted, or at least sign the document in the presence of an independent lawyer) I don't know if anyone actually pursued legal advice when things went off the rails.

I hope your group has a positive experience if you go ahead with it.  As I said in my original post, I think the concept has merit.  Not my cup of tea, but could work if, and the big if, everybody takes their responsibilities completely seriously and it's a business, not a friendship thing.


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## caribbeansun (Aug 22, 2010)

We've had none of the friendship issues talked about here, we've been doing this for 5 years now.  What is at issue is the fact that the property is cash flow negative and we are all tired of paying into the kitty.



Elan said:


> Has anyone gone together with other families and purchased vacation property?  I've had the discussion of doing just this with some friends and work colleagues numerous times, but we've never gone beyond that.  Now that condo prices are down considerably in the resort town that's a couple hours from home, we've talked a bit more seriously.  Anyone done such a thing, and if so, how is it working out?


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## glypnirsgirl (Aug 22, 2010)

Elan said:


> Elaine, thanks for the detailed and helpful response.
> 
> Were there ever issues that arose where the partners could not agree on a solution?  If so, how were they handled?



There were times when things were pretty contentious. When we could not have unanimous agreement, we would have a very civilized round table discussion. Each of us was allowed a specific period of time which we agreed to ahead of the discussion - and it varied based on the complexity of the issue. And we would set a timer and agree not to interrupt each other and each person would state their own view point. We would do that for a maximum of three rounds. And would not vote at that meeting, but adjourn to do additional research on each other's as well as our own view point. Then we would do the same thing at the next meeting and decide by a majority at the second meeting whether to vote at that meeting or to adjourn to a third meeting. By agreeing to not interrupt one another, it kept our meetings from getting too contentious. None of us were hotheads or blowhards - so that helped alot. We always abided by the "no interruption" rule as well as stopping speaking as soon as the timer went off. 



Our major areas of disagreement were involving the amount to be spent on major repairs. The roof issue for the second purchase was the most controversial. Some of the investors wanted to just patch the roof. Most of us wanted to replace the roof. It was one of those flat roofs where there was supposed to be an impermeable barrier. The roof was really old. Most of us did not think that patching it would be a good solution.

Our corporate documents allowed for 8 units of 12 to make final decisions. To preserve the congeniality, we chose to attempt on unanimity. When the two members who wanted to only repair the roofs did not want to continue to make additional investments, each of us understood that their main concern was the money to tally up. One of the wealthier members bought out one unit. One of the members was a sister to one of the other "dissenters" and she bought her sister's units. If no one had had the money to buy out those units, we would have just dissolved rather than requiring people to make additional out of pocket investments that although anticipated as a possibility were not considered to be likely.

The second thing was that there was sometimes contention about whether some of the members were not doing their duties. The core group of professionals, me, the CPA, the most experienced property rehabber did much more work than anyone else. I spent more time up-front getting all of the legal documents together than anyone else did, but then I only had to do occasional work from then on. I did the annual meeting minutes and the special meeting minutes. Someone else, I don't remember who, sent out the notices for the meetings. The CPA spent time for more than 20 years doing the tax documents for the corporation, probably overall, she spent more hours than anyone else because she balanced the checking accounts. Still someone else did the monthly billing and made sure that everyone was paying their obligations. As far as I know, everyone was perfect about paying their obligations. I think that is probably the most likely area for contention. 

Anyway, it was one of the other people who was asked to show the property to prospective renters that believed that she was being put upon. Because her office was close to the buildings, she had signed up for that duty. She did not anticipate that it would take as long to rent as it did and that she would have to show it as many times as she did. She got mad because she was expected to be interrupted while everyone else could plan for their obligations. When Lois (the CPA) and I told her how much billable time our services were worth that were being "donated" she calmed down some, but always resentful whenever one of the properties became vacant.

I would not do the specific assigned tasks that we did. Instead, I would hire professionals and pay them. That will insure that things are equal. That would include having a housekeeper to come in and clean after departure. Probably have an agreement that everyone will strip beds, put dishes in the dishwasher and run it, etc. But still have the housekeeper come in. Or agree that each person will take before and after pictures of the unit to minimize those types of disagreement. 

I think that it is important that major expenditures require at least a 2/3 vote of the members. 

Also that ahead of time you will agree to pay not just enough to cover the PITI (principal, interest, taxes and insurance) but also to have ample reserves to cover the maintenance fees, housekeeping fees, and property management fees. You will need to agree on whether to pay additional towards the principal on the loan if there becomes a surplus in the reserves (this was something that the CPA and I always wanted to do, but were always outvoted --- and that was when interest was really high!).

I believe that having a corporation with well thought out rules was the secret of our success. The second, was having such a congenial group of people.

elaine


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## T_R_Oglodyte (Aug 22, 2010)

If you decide to proceed, you should approach it as you would a business partnership and set up a specific legal entity to hold title. Most likely that would be a LLC.

Then you should prepare a good set of partnership documents that lays out responsibilities, obligations, buyouts, forced terminations, procedures for determining market valuations when that is necessary (buyouts, forced terminations, etc.)  

You need to decide what happens if someone dies.  Will you accept as new partners anyone to whom the deceased wills the interest?  What if someone gets divorced?  A spouse dies and the partner remarries?  What is someone simply fails to keep up their obligations?

You should then have your documents reviewed by an attorney experienced in partnership law.  He or she will probably identify some other issues that need to be considered.

******

The time to work out all of those difficulties is in the beginning, when everyone is getting along and motivated to find workable and fair solutions.  And a good set of documents will likely save some friendships.

******

I uesed to work in S Corporation (which is very similar legally to a partnership) that had excellent partnership agreements.  We were able to deal with a lot of issues, including forceouts of some founders, with a minimum of fuss and bad blood.  In some conversations with some people also involved with similar companies, I came to realize how good our documents were as they told tales about the kinds of disputes that erupted in their organizations.


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## caribbeansun (Aug 23, 2010)

Would strongly recommend including a termination date in the agreement with the option to renew.  Not everyone will feel as good about it 5 or 10 years from now and they will want a way out.  If the others want to continue on then they can but at least there's an out for those not as happy.


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## Elan (Aug 23, 2010)

Thanks to all of those who replied, especially at the latter part of the thread.  Definitely some good input.  I need to talk this over some more with the interested parties.


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