There was a broker who set up a rental in a resort area that I thought was somewhat clever.
If you do airbnb then you need to rent it out every night of the year, have cleaning expenses, have multiple rentals. Unless you are getting a serious margin, that's kind of a pain.
So what he came up with was: Sell 1/8th of the property to 8 different owners. Each gets like 6 weeks use per year. Each owner has to pay like 125 per month on utilities & management.
Advantages: This is probably going to be a no money down deal or better since you are selling off the property and you might even get full value or better.
You don't have to rent it out every night, so you are cutting back on the leasing work.
You have to be in an area where it's desireable to get the 8 owners----or maybe you don't put the deal in effect until you get it mostly (or all) rented, I don't know.
I have heard from Sean O'Toole about airbnb rentals in silicon valley, SF and other desireable areas. But it still seems like alot of work since you have to send in housekeeping every time it becomes vacant---and you have to negotiate numerous leases.
And if someone wants out of the deal you can reserve a first right of refusal to approve the new owner.
Might be a strategy for making an overleveraged property at least cash neutral. Or, if you needed money to rehab the property, you could sell 6 weeks occupancy in exchange, etc.
Anyone tried this?
Full disclosure, I haven't.
But it's not a horrible deal for the owners, although they aren't in charge, and for that reason I'd never buy a fractional interest.
And I don't know how they handle repairs---do they split it up 8 ways? I'm guessing Yes.
For an annual expenditure of $1800, it's doesn't seem like such a bad deal, although some will say they might get tired of the place too soon, etc.
Actually, it may not be quite the bargain it appears at first sight. 1800 divided 42 (6 weeks) is 42.85----so only if the hotels etc are much pricier than that is this kind of arrangement going to necessarily be advantageous.
The other question: What happens if you don't end up spending 6 weeks there? That could be a problem unless you have alot of leisure and/or are retired.
From what I hear, they draw cards to see who gets the best date(s).
You can even get rid of the management (in theory) by giving someone who manages it extra time (1 or more weekends). In this case, they had a CPA who just asked for an extra weekend. (Such a deal, that).
Another use for this kind of structure: Where you have a rental that you want to share with family, but they will share some of the costs. That might work out better since you already have a pre existing relationship between the parties.
Whoever the organizer is, they are probably going to need a buyout clause in case someone falls on hard times and needs to be removed from the rotation, etc.
I haven't really thought how you would structure this, but clearly this kind of structure requires alot of cooperation between the parties. You would need an attorney to consider all the angles (No, I'm not doing that for free---but I am flagging this as a potential downside).
No guarantees, guys, it's just something I saw and felt compelled to comment about.