Time Share Cottage Ownership Question (NF sorta)

[steve_paul]

I have found a small cottage for sale that is of interest to me. Problem is that until I retire it is quite a distance to enjoy on a regular basis. What I am wondering is, does anyone have any experience with group ownership / time sharing of a recreational property?

 

Talking to my wife last night, we thought maybe a 4 person ownership group would work, each group buying an equal share of the cottage which would entitle them to 5 weeks per year during the summer (20 weeks from Victoria Day weekend until October 4). Weeks could be divided up at the start of the summer with each person taking turns picking the weeks they want and each partner getting at least one long weekend per year. Each year prior to May 1st each partner puts in an equal amount to the group operating bank account which would be used for annual taxes, dues, etc as well as fix up and maintenance (Don't pay your annual fees - you don't use the cottage until paid in full). You cannot use the cottage as collateral on any other personal loan. If one person wanted out, the other 3 partners would have first right to buy their share at the market / appraised rate at the time.

 

Does anyone have experience with this type of setup?

Any drawbacks you can see?

Any one interested in exploring this option? (cottage is on the Lower French River, initial purchase investment would be in the $10,000 to $15,000 range for your ownership, group would own the cottage itself with land leased (non native land))

 

Any input appreciated.

Edited July 11, 2008 by steve_paul

[Fisherman]

An old friend of mine had a time share in the condos at Thornbury, company run mind you, but he seemed to like it. One of the issues that would "scare" me away from that is the problem when it comes to paying, is family # one a little down on money this year , slow in paying, another one of the group has to cough up cash to keep money flowing to maintain payments, etc. Then there's the "you didn't clean up after your week", you would need a solid group f people to work with.

[Greencoachdog]

Can you really own time?

[Victor]

I'd agree with Fisherman.

 

There'd be the problem of "who left this mess here" ... or like "who broke ___ ?"

 

Would it be a better idea to buy the place and then rent it out?

[JohnF]

Can you really own time?

 

Sounds to me like he's talking about creating their own private partnership, not a legally constituted timeshare.

 

Other than the inherent problems of determining who gets what time of the year, and the risk that someone may not pull their share of the load when it comes to maintenance issues, I see nothing wrong with the concept. I might suggest doing something like the condo & timeshare corps do and collect a regular maintenance fee from each user to be retained in a secure account (all partners must sign withdrawals) with a formal accounting provided each year. This could be used then for unexpected maintenance issues instead of imposing a big hit on the partners when the issue arises.

 

We have a number of weeks in a very good timeshare down in Mexico. We spend the month of January there for peanuts. It's a great concept if properly handled.

 

JF

[Nemo]

It would have to be well "papered" by a lawyer. I would discuss with your lawyer.

 

It also breaks my number one rule of mixing business with pleasure. These situations can be a real heartbreaker. I would post on the Cottage Life website. I bet there are tons of people there with insight.

 

http://forums.cottagelife.com/

[wkrp]

Google this site www.frenchriver.com We own a 1/2 share and love it.

[steve_paul]

Great input everyone, thanks. I will look into the cottage life forums Nemo, thanks.

 

With respect to non payment, I was hoping to work it so the initial investment would include the purchase price, a couple years of tax / fee payments and a buffer for maintenance / repairs. Set up the account as suggested with 4 signings required, formal bookkeeping, etc. If there is a buffer in the account of at least one - two years, then a minor financial hiccup by one partner could be weathered short term. If it was a long term problem, a provision in the agreement could call for a forfeiture of share bought back by the other partners at original cost or something.

 

I don't want to buy and rent - too much work back and forth every time someone new is coming in. Also, the cleaning, etc would have to be on an honour system basis and hope that everyone is a responsible adult in the group (sometimes that is more than you can hope for)

 

Glen that is very philosophical. Not sure if you can own time but you can own "things" that make the "time" you have much more enjoyable. That and don't whiz into the wind are my tidbits of philosophy today.

[lookinforwalleye]

I would never buy a property with 3 other parties for all the obvious reasons and probably a few more that could pop up.

[Tacklebuster]

the more partners the more problems. In addition to what has already been mentioned, you need a pre-arranged arbitrator (perhaps a lawyer) in the event there is any disagreement that can't be settled amongst yourselves, such as the value of the property in the event one of the parties wants out. Is the share transferable in the event one of the partners dies?, etc. etc.

[sturgman]

I have a feeling that this arrangement could turn good/great friends into very quick enemies.

[steve_paul]

I have a feeling that this arrangement could turn good/great friends into very quick enemies.

 

Done incorrectly or with the wrong people you are right, could be a disaster.

 

Just something we are throwing around, and that thought as well as mentioned by others was the first thing that crossed our minds.

 

Annual fees / lease would be $2400 per year so $600 per partner which is still less than / equal to a cabin rental for one week per year.

[JohnF]

I have a feeling that this arrangement could turn good/great friends into very quick enemies.

 

There are definitely pros and cons to it, but if sensible ground rules are established at the outset it can be a nice inexpensive way to have a getaway spot. The alternative is always renting or laying out a lot more money and paying all the expenses yourself. Then you have to become a landlord and these days that can be a bigger headache than a partnership. Better the devil you know and all that ...

 

And if it goes to hell in a handcart have an opt-out solution already agreed upon. The simplest is probably a shotgun buyout.

 

JF

[steve_paul]

And if it goes to hell in a handcart have an opt-out solution already agreed upon. The simplest is probably a shotgun buyout.

 

John, what is a shotgun buyout??

[ccmtcanada]

Steve...check out this link for shot gun clauses

 

http://en.wikipedia.org/wiki/Shotgun_clause

[steve_paul]

Steve...check out this link for shot gun clauses

 

http://en.wikipedia.org/wiki/Shotgun_clause

 

Thanks Cliff, that clears it up.

 

Was afraid it meant something more along these lines

 

[JohnF]

John, what is a shotgun buyout??

 

See Cliff's link. That's a good explanation. Basically it amounts to one partner offering to buy out another for a certain price. The one receiving the offer has the option of either accepting and selling, or turning the tables and paying the guy who made the offer the same amount for his share. It makes for pretty reasonable offers.

 

JF

[yellowboat]

That's one fine piece of machinary you have there, rabbits or grouse.

[SlowPoke]

I love the idea but the most importent thing to consider is an "out" stratagy.

For example, "shotgun buyout" - think of it more as a concept. A pre determined arrangement that would allow one of the members to purchase outright and the other shareholders would realize a higher gain than selling otherwise.

"You" want to buy "Us" out, it will cost you 10% over market value.

Also consider a sunset clause. A pre determined period of time in which the shareholders are commited to ownership and maintenance and can be addressed at a later date. Let's say 3 years for example. Appoint an independent party to collect in advance 3yrs worth of mortgage and predicted maintenance costs. As your 3rd year anniversary approaches, you get together at the campfire and discuss entering another term or opting out.

-Brian

[steve_paul]

That's one fine piece of machinary you have there, rabbits or grouse.

 

Deer Flys and mosquitos up north mostly

[steve_paul]

Also consider a sunset clause. A pre determined period of time in which the shareholders are commited to ownership and maintenance and can be addressed at a later date. Let's say 3 years for example. Appoint an independent party to collect in advance 3yrs worth of mortgage and predicted maintenance costs. As your 3rd year anniversary approaches, you get together at the campfire and discuss entering another term or opting out.

-Brian

 

Good idea Brian, I was thinking collect the first 3 years with the initial purchase price and you have a nice buffer in the account and revisit everyones position after the 2nd year / prior to the 3rd year.

[JohnF]

Deer Flys and mosquitos up north mostly

 

Barrett 50's are for sissies. That's a manly piece.

 

JF

[steve_paul]

Barrett 50's are for sissies. That's a manly piece.

 

JF

 

Thanks John but I think the Manly Piece compliments belong on "Big Cliff's Balls" thread

 

Thanks everyone for the input, going to do a little more "discussing" tonight at the trailer about it with Cindy and see what we can come up with.

[mkeyes]

I don't think I could ever do a time share on my own because I want to be able to relax about the whole thing. There are some time shares being built soon on our lake, but then a company is managing the whole thing, which I think would be alot more relaxing. Even though they are not a real popular bunch on the lake right now

[JohnF]

I don't think I could ever do a time share on my own because I want to be able to relax about the whole thing. There are some time shares being built soon on our lake, but then a company is managing the whole thing, which I think would be alot more relaxing. Even though they are not a real popular bunch on the lake right now

 

This isn't really a timeshare, just a limited partnership. The smaller the membership, the more control each member has.

 

JF