QUOTE (thomasbeyer2000 @ Apr 13 2008, 07:13 PM) ???
52 weeks times $1000/week = $52,000 annually .. where did the 260K come from ??
there will be vacancies !!
get 3 to 5 or 8 LIKE MINDED friends first .. THIS IS VERY VERY VERY HARD .. then agree to a location AND a type of property AND a price point AND a mortgage amount AND a monthly payment schedule AND a set of rules AND have everyone commit $10,000 CASH EACH in a trust account .. THEN (and ONLY then) .. start looking .. you will see how fast this venture will fall apart !!
Who will qualify for a mortgage ? Who will fix broken cupboards ? Who will pay for the couch that has a stain ? 2 TVs or 4 ? one DVD player or 3 ? Who can stay Christmas 2008 .. who Christmas 2009 .. how much will a person pay if they stay more than 8 weeks .. what happens if someone wants out .. what happens if someone stops paying their monthly dues ?
find an AGREEMENT first .. as MANY MANY MANY properties are for sale .. so focus on what is HARD first (i.e. the agreement + rules + cash) .. then find what is easy (and fun): the property !
Good bye Fractional Ownership idea... too much like a timeshare... refining this idea further... trying to come up with the best scenerio and overcoming the obstacles along the way and focus on the goal.
There seems to be several ways to set this up but there are things to consider no matter which way you go i am finding.
Here is the simplified business plan in a nutshell...
Short Term Vacation Rentals Targeting U.S. Destination Vacation Areas Las Vegas, Orlando, Phoenix etc.
Example: 20 core group of investors create a U.S. corporation in one state to start buying property there, each buy $10,000 worth of shares = $260,000 cash in the bank to buy, furnish and leave some operating capital in the bank. Say the group buys an Orlando property. Idea now is not to rent it to a local for $1000 a month but to rent it to vacationers, locals who need a vacation home for visitors, people in a moving transition locally, etc. (a short term rental for whatever reason) at $1000 a week! So the annual possible income goes from $12K to $52K max. First come, first serve. The 20 investors can rent at $1000 a week, which is the fair market value of the area plus we have 20 salepeople promoting our venture.
Next step. We only have one property so we can add just a mere $10,000 more buy buying more shares and repeat our model. We can reinvest some of our profits and $10,000 can be saved up fairly quickly per investor to buy more shares.
So if we max out the number of properties held by the U.S. corporation to 5, we then can take dividends to reinvest in other states or be doing properties in different states along the way creating new corporations in each state. So each investor ends up with $50K into one corporation and corporation maxes the annual income at $52K X 5 properties! As more properties are acquired, we can offer a better choice of weeks available.
This idea would work for Canadian vacation destination properties as well. And it could go world wide!
Some of the issues:
1. Does one or two directors have to be local in that state or can we all be Canadian shareholders of a U.S. C corporation?
2. Should there be one corporation for each property because of the lawsuit potential or would our insurance quite adequately cover that issue?
3. Should we just have 15 investors in a Canadian Corporation and that corporation creates the U.S. C corporations?
4. Should we just have 15 investors in a Canadian Corporation and add any extra shareholders to the U.S. C corporation?
5. Making sure that the resolutions are done and everyone is on the same page. And also that we follow a well laid out plan as in that we are targeting 3 bedroom bungalows, X number of square footage, etc...
6. While our 15 to 20 investors will be travelling to the U.S. enjoying the properties, we would likely have to have a property manager in each of the areas. Who cleans up each week is another consideration.
7. An expensive "Cross Border" Accountant needs to be hired to set this up along with a good "Cross Border" lawyer. The lucky part is once a model is tweaked and working, we can just duplicate it.
8. How would you blend JVs into this type of project or would you go that route? The idea is that the investors are equal in this project. The ones going to the desired area to purchase property would be compensated for their expenses.
I wonder if there are others out there working with vacation property rentals? Especially U.S. ones? Are there some pitfalls with the above plan that you can point out? Anything that looks too good to be true... well you know the rest!
Dean
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