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PTWizard

Beach Lover
Jan 17, 2005
80
0
Columbus, OH
Thanks Iqueequeg,

The halfshare.com site is very interesting. I've been thinking about selling a 1/3 or 1/2 interest in my Paradise by the Sea home, "Paradise Romantica" for a while now. It's a terrific gulf view property with a great rental history but I'd like to diversify my investments.
 

SHELLY

SoWal Insider
Jun 13, 2005
5,770
802
The cost of ownership in the PRC includes all maintenance, housekeeping, insurance etc.. Also, if a TV, furniture or something else goes down it is replaced. If you want to own a vacation place at the beach with 0 maintenance and worries, then this type of ownership may be for you. Not for everyone for sure.
Not aware of any fractionals at WS.

...Zero maintenance and worries? REALLY? Is that in writing on the contract? Will they replace the TV and furniture and other stuff for free? Once you plunk down the 1/8 purchase price is that it? No more fees? No more assessments? Seriously...what's not included in the initial purchase price?


.
 
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fisher

Beach Fanatic
Sep 19, 2005
822
76
The cost of ownership in the PRC includes all maintenance, housekeeping, insurance etc.. Also, if a TV, furniture or something else goes down it is replaced. Right now there are two 2BR/2BATH condos on the south side of 30a( let's compare apples with apples ) for less than $1M (795k and 850k) and about the same square footage as the PRC units (1400 sq.ft.). These are both 1st floor units in buildings at the west end of the property, no view of course, and a little bit of a walk to beach walkover, beach club, etc.
If you want to own a vacation place at the beach with 0 maintenance and worries, then this type of ownership may be for you. Not for everyone for sure.
Not aware of any fractionals at WS.

You are kidding aren't you??? NO MAINTENANCE AND NO FEES????

There certainly are fees on an annual basis and they are fairly steep to handle all those FREE maintenance items you talk about.
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
The question was asked, what can you buy for that price on the south side of 30A. Given that you only get five weeks of use, when you compare apples to apples, you should be able to find a 3000 sf home within a block from the beach for that price.

Warning against going in as partners with other people, especially people who cannot currently afford the full share and need to lighten the burden. If your partner runs out of money and stops paying the monthly bills, YOU are now stuck paying full share or risking foreclosure. I don't say that lightly. Even if you go in with your best friend to buy a place, you better have all of the what-ifs worked out, unless you don't mind either loosing a friend, losing the property, or both. Unforeseen circumstances can and do occur. Someone may be fat and happy today, and get divorced tomorrow, or have a costly emergency. Be careful about your partnerships.

As long as you are talking partnerships, you may as well consider a similar, yet different set-up -- forming a corporation to buy the property, and selling shares to people. The people don't own the property, but they simply own shares in the corporation. Note that when one is ready to sell, they sell the shares of the corporation, not an interest in the property, and because of that, real estate agents cannot list, nor sell the shares of the corporation. That would be a violation of Securities laws, so it might be much more difficult to market.
 

Pirate

Beach Fanatic
Jan 2, 2006
331
29
The question was asked, what can you buy for that price on the south side of 30A. Given that you only get five weeks of use, when you compare apples to apples, you should be able to find a 3000 sf home within a block from the beach for that price.

Warning against going in as partners with other people, especially people who cannot currently afford the full share and need to lighten the burden. If your partner runs out of money and stops paying the monthly bills, YOU are now stuck paying full share or risking foreclosure. I don't say that lightly. Even if you go in with your best friend to buy a place, you better have all of the what-ifs worked out, unless you don't mind either loosing a friend, losing the property, or both. Unforeseen circumstances can and do occur. Someone may be fat and happy today, and get divorced tomorrow, or have a costly emergency. Be careful about your partnerships.

As long as you are talking partnerships, you may as well consider a similar, yet different set-up -- forming a corporation to buy the property, and selling shares to people. The people don't own the property, but they simply own shares in the corporation. Note that when one is ready to sell, they sell the shares of the corporation, not an interest in the property, and because of that, real estate agents cannot list, nor sell the shares of the corporation. That would be a violation of Securities laws, so it might be much more difficult to market.

Whenever I read a Smiling Joe post I know it is going to contain some great information. On the selling shares idea I have to say it is a recipe for disaster in my opinion, especially for someone with little knowledge of stocks and real estate. If someone can't afford a house at the beach, they shouldn't buy a house at the beach... period. All of the timeshares and fractionals are designed to make someone other than the buyer money in every step of the process, including ownership.
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
Pirate, I agree, and wasn't really recommending that novices form corporations. Rather than buying fractionals, I believe your money would be better spent renting a place for the five weeks (in reality, you probably won't vacation here for five weeks), and pocketing the difference in cash. If you are looking for long term investments and cannot afford a beach house, maybe you should look for a vacant lot, with no HOA dues and fees. There are nice lots in SoWal for under $100,000.
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
Full Disclosure: I am a Realtor.

Let's throw up some real numbers. Not everyone should buy real estate. Being an owner of a vacation home is as much a social status or lifestyle thing, as it is an investment. I mentioned renting a place for the five weeks and pocketing the difference.

Let's compare purchasing a fractional (five weeks use) for $150,000 to renting the house, currently available for long term rent in Grayton Beach.

For the fractional purchase, you put down 20% (not like the old days), which is $30,000, leaving you a note of $120,000. Let's say you get a 30year fixed rate of 6%, to keep the math simple. Your annual expense of the interest and principle is $8,640. You really don't build much equity in the first 7 years (average length of ownership for a home), and the value of your fractional probably won't be increasing much over time (just my educated guess). Remember the opportunity cost of your $30,000. Even with a 4% interest on that $30,000, that is an additional $1,200 per year. Also remember the monthly dues and fees, and assessments when the units are refurbished. Adding up the $8,640 and the $1,200, plus another $1,500 (guesstimate of additional expenses) that is a total of $11,340 per year, for your five weeks of use of a fairly small unit.

On the other hand, the long term rental in Grayton Beach is at a cost of $1,500 per month, or $18,000 per year. However, your use is now 52 weeks instead of only five weeks. I'm not sure that it is furnished, but you could buy some old condo furniture for almost nothing, to furnish it, so lets add another $3,000 to furnish. You will also have utilities expense, so lets throw in basic cable, phone, internet, water, sewer, power at an additional $250 per month (or $3,000 per year). Now, your rental unit is up to $24,000 for the first year, and $21,000 per additional year. Rather than being tied into a major financial investment with a partner, now, you can find three other people to go in with you on the rental, costing each of you only $6,000 for 12 weeks of usage per family. So, you get 2.5x more usage at roughly half the expense, and you are not tied into a long term investment with other people. You don't have to worry about selling it if you need the cash. Also, you have a private yard and the entire house to yourself when you are there. You also have less people with whom to share the availability of the unit, so each of you can come for more holidays and different times of the year.
 

Pirate

Beach Fanatic
Jan 2, 2006
331
29
Pirate, I agree, and wasn't really recommending that novices form corporations. Rather than buying fractionals, I believe your money would be better spent renting a place for the five weeks (in reality, you probably won't vacation here for five weeks), and pocketing the difference in cash. If you are looking for long term investments and cannot afford a beach house, maybe you should look for a vacant lot, with no HOA dues and fees. There are nice lots in SoWal for under $100,000.

A five week vacation sounds like a great idea. There are also quite a few houses and condos on the market that would do quite well on the rental market for under 500k right now. Some of them might even come close to breaking even on cash flow. I am sure Smiling Joe could point you in the right direction if you were looking to buy.
 

TooFarTampa

SoWal Insider
You have gotten some great advice on this thread. I just wanted to add a little bit to one of SJ's many great points:

As long as you are talking partnerships, you may as well consider a similar, yet different set-up -- forming a corporation to buy the property, and selling shares to people. The people don't own the property, but they simply own shares in the corporation. Note that when one is ready to sell, they sell the shares of the corporation, not an interest in the property, and because of that, real estate agents cannot list, nor sell the shares of the corporation. That would be a violation of Securities laws, so it might be much more difficult to market.

Forming a limited liability corporation to allow several people to purchase a beach house together, with the idea that any of them can sell their share at any time, only works if there is no mortgage on the property. Even during the lending boom, banks were not lending directly to LLCs formed for this purpose -- they required that each member personally guaranteed the loan.

I have first-hand experience with this. Every member's name goes on the loan, and if one member decides to leave or sell his portion to someone else, that requires refinancing to get the old member's name off the mortgage or the new member onto the new mortgage. Then you have the issue of differing cost basis for different members. The kind of trading you are talking about would only work with cash. The alternative, which the OP asked about in the first place, is true fractional ownership program where individuals get their own mortgages for their portion of the property. But given all the reasons posted above, they just never sound like a good deal to me in the long run.
 
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