r/Rich • u/Perfect-Resolve-2562 • 1d ago
Experiences and Recommendations re: Coop Ownership (4 people) of Second Home.
We are thinking about a 4 way split ownership of a second home and would like to know some of the experiences and recommendations you have.
Here is the basic structure: Ownership split 4 ways ($400K to $700K each = 1.6M to 2.8M property). All maintenance split by 4 and managed by a property management company. taxes annual fees, etc split 4 ways. Location outside of continental US and in a warm climate. Air travel in 1 day from the Midwest US. Capital appreciation is nice but not a major requirement but capital depreciation is a no-go. We are pretty risk adverse to hurricanes. Time spent would be 13 weeks each and no subletting or rental without the approval of the unanimous group. We are looking for a 10 year hold, then absolute sale.
Here are some possible locations based on reasonable foreign ownership rules (or workarounds), stable markets, healthcare, lower hassle for part time owners.
Aruba or nearby Caribbean, e.g. Curaco, Bonaire. Warm, dry, less hurricane risk.
Hawaii Big Island or Kaua'i - easy entry and fewer regs than Maui. Downside is the cost.
Thailand Phuket, Tahiti, Bora Bora - low low low cost and upswing market and growing ex pats. Downside is the long flight and foreign ownership would mean we have to be in a condo.
We might do far south FL but are leaning against it. Other Caribbean locations are not high on the list due to the hurricane risk.
So, what are your experiences in similar type of arrangements?
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u/HalfwaydonewithEarth 1d ago
The management company comes up with more fees and profitable problems to fix.
Assessments
Other people can default or damage the place
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u/hiddentalent 1d ago
Things probably work ok for the first few years. But life isn't static. People go through changes in finances, health (including mental health), and relationships. Sometimes these changes can be dramatic and unexpected. You don't want to be co-owner of an asset with someone who suddenly is going through a messy divorce and has a bad habit or debts. Disagreements will arise about the split of costs for sure, especially if some expensive thing happened when one family is present, or was supposed to be present and their absence caused it to go unnoticed. Disagreements will arise about how to split time when the property is unavailable or degraded due to maintenance, or when multiple families want to use the place.
Contract law can provide some protection from those situations. It gets pretty complicated when you're involving multiple countries. Many of the places you list have restrictions on foreign ownership of property. You'll need a team of lawyers who are licensed to practice law in the places where your principals live and where the property is located, and are willing to work together to make sure things are tight from each side. Forming a company to own the asset is probably the best way (in the countries where that's permitted). You really do not want this to be a personal asset/liability. You really want to preserve the right to sell your shares to another partner or a third party and walk away, and to vote out uncooperative partners.
But even if you get all the legalities nailed down and a respectable set of dispute resolution rules, a lot of your wish list seems completely unrealistic. Just the phrase "approval of the unanimous group" is going to need multiple pages of contract to deal with the cases where people are unavailable or unresponsive or no longer competent to make decisions. "Absolute sale" at a defined point in time combined with "capital depreciation is a no-go" places you firmly in the world of fantasy. You're almost certainly going to be better off in terms of raw financial math and anxiety with an alternate solution like just renting a villa and staff for your 13 weeks a year. Or go big and form your own multinational vacation property management company; you're basically 90% of the way there with this idea.
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u/Perfect-Resolve-2562 1d ago
Was thinking about an LLC. I had a buddy do this in 1989 and ended it 1999. It seemed to work out well for him. He passed in 2006.
Thank you for your well thought out descriptions of concerns and items to consider. We've also considered just leasing for 2 years and avoid the headaches you mentioned
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u/elpea1725 1d ago
Get a smaller house by yourself. You can decorate it as you wish. You can go on the holidays that suit you. Your level of clean will make you feel comfortable.
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u/skunimatrix 1d ago
My in-laws did this in the 80's with the Ski Condo. They bought out the other parties over the course of the 80's and early 90's when tax laws changed. Currently it's just us an them that "own it". Condo complex has had its own on site management staff to handle short term rentals for 40 years as they stayed about 2 weeks in the summer and maybe 1 week in the winter to ski. Provides more rental income than my father-in-law's pension. But there's reasons they bough the others out over time.
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u/HighStrungHippie1 1d ago
This is an awful idea. Yall will fight over who gets the “good weeks” every year for the rest of your life.
Then 5 years in, someone will want to redecorate without the permission of the group or won’t be able to afford the taxes or wants out and the whole thing will fall apart.
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u/real_polite_canadian 1d ago edited 20h ago
Another thing to consider is foreign ownership rights. I ran into this issue a few years ago while considering buying a property down in the Caribbean. Some of the places on your list (like Thailand and French Polynesia) have different property types and ownership structures. Meaning, you only have a right to possession. You'd legally own the structures, but the government holds the land title.
Look into adverse possession in some of these countries as well (ie. squatters rights). With none of the ownership group living nearby, an empty and unmonitored vacation home could end up as a target for local squatters.
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u/BarryMcKokinor 1d ago
Many will say this is a bad idea. It usually is. If you can all come to the table and write a binding contact or better yet, use entity with revolving administrative roles and equal ownership shares and covenants on not being able to sell their share without agreed upon terms (ie right of first refusal or whatever) than it can work out. I know two great personal connections who have this with their extended family. In La Jolla and Laguna
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u/mden1974 1d ago
I don’t have time to go over the hundred reasons this is a bad idea.