-by Michael J. Tolan
iscover how fortunes saved are fortunes gained in second home acquisition vs. renting hotel rooms over time and the newest smartest trends for making your money count.
Using Shared Assets
“Who’s been sleeping in my bed?”
Ask yourself the question… the last time you checked in to a resort hotel room, did you ask who slept in the room the night before you did? Did you ask about what they did for a living, how much they weighed, when was the last time they had a dental check–up? Did you even think about it? Isn’t denial great?
No, we relish the idea of diving into a fresh bed… So what does this prove? Simply that we have become culturally trained that we do not need to own something outright to use it, or even claim it as if it were ours.
It becomes “my hotel suite, my robe in my room, our wide screen TV in our room, our towels”. Yes, we have learned to become instant captains of possession, ready to take credit and claim ownership over any service we pay for in today’s world. (Mine …all mine)
So why then, do we buy things, when we can just pay to use them?
The answer is sometimes either economical, traditional, egoistic, market availability or a combination of all these reasons. However, have you noticed that some of these reasons avail themselves to a little question in today’s changing world?
Let us take the purchase of second home for example. Why would anyone ever consider this as an option?
Well, maybe, they like the area or what they can experience there for themselves or for their family, they fall in love with the idea and living the dream. Fair enough, and then come the other factors that form part of their decision-making seesaw of balancing emotion with logic.
As it is a property, chances are that it will appreciate in value over the years is a favorite.
When we are not using it, it can be placed into a rental pool and possibly rented, to give us an income to cover costs of running, is another biggie for some.
But many are starting to ask new questions, questions that are driving a new industry born out of consumer-driven logic based on a new set of behaviors.
Why should I pay for it when I am not using it, worry about local taxes and tariffs, who can I really trust to look after the property in my absence, collect rents if it is actually rented, and hope that the renters have respect for all the money I have spent to have it looking so snappy?
To understand the answers to this question and the new outlook of solutions, we need to trace back our own ancestry.
Yes, back to, say, the days when humans lived in tribes.
Tribes were typically groups of people who bonded together to survive, to live with more security and a better quality of life than, say, going it alone in the wild. But many of these tribes harnessed a power, a power of collective effort and collective rewards.
12 men would set off on a hunting trip, and score four big buffalo.
It was good that 12 men went, as they needed the entire team to carry their share of the burden back to base camp, especially that all would share in the feast.
The good news was that this would feed the entire tribe, and through collective partnership, other members within the tribe performed other functions to keep their VIP village partner status to have rights to all rewards.
The deadbeats who thought it might be a good idea not to support the group were quickly warned, corrected on the right path, or kicked out of the tribe through banishment.
Hey, what about the guy out there on his own? Well, he did fine, perfect, in fact, when he scored — until he missed, then maybe just starved and died.
He was not using the power of partnership to his advantage.
Now let’s leapfrog back to the 21st century, and see ourselves out of this economic cloud we are hearing about daily.
Based on my personal observations, I believe that transformation has already decided that it was a good idea to come early, to show us, to test us and remind us that sometimes ‘necessity is the mother of invention’.
So, here is the magic question. Does everything we believed 10 years ago hold true today?
Our institutions that were icons of success have all been challenged, many of them burning to the ground-zero of insolvency; the way we receive information then was the news at 8pm, instead of via our I-phone or Internet access device. Ten years ago it made a lot of sense to microwave food in plastic containers, wildly invest in the ‘in’ firms on Wall Street that were 50 or 100 years old, such as to buy stock in America’s biggest companies like Kodak.
If you think about it, we do and think more differently today than you may have noticed, as the world and its axis has aimed a slight head start to transformational thinking already.
Do you pay your bills the same way today? How about the post office, been there lately?
Did you notice traffic cops do less, cameras do more and you get more fines as result?
Have you bought a cassette tape lately? A music CD?
With all that we have today that we count as ‘in’, such as texting, facebook, viral marketing, video phones, trends and habits in behavior, yes, they are changing.
Remember what an airline ticket used to look like? If you travel frequently, when is that last time you can say you received all that paper, bundled into a half brochure that bulged in your jacket just to give you access to a seat on a plane.
Speaking of planes, do you think more or fewer people today travel on their own private jet? Well, if you guessed fewer because of the economy you would be shocked to know you are wrong.
However, their secret, and many have kept it that way, is a tribal solution. Joining in together with others to maximize the benefits while lowering the cost.
Enter Fractional Ownership of Jets, used by rock stars, corporations and smart jet setters.
The idea is that everyone does not always fly every day of the week, therefore by a well organized recipe, or system, ownership of a very expensive asset can be controlled by the buying power of partnership; therefore, everyone wins.
This transformation ‘in’ thinking about acquired assets that are ‘just for me’, so the ego said, brings us back to the “Who was in my hotel room last night before I checked in” question.
Agile investors, able to assimilate the ‘make sense approach’ to owning part of an asset and using it to the max, are winning the day in versatility and savings.
There is an old adage that says, ”Every penny you save is 100% profit”.
The power of tribal partnerships in second home acquisition is no longer a fad by a small group of people in a beach area. It has grown into a multi-billion dollar business, capturing the eagle eyes of some of the biggest names in business, from Hyatt to Trump, and has now pollinated this make-sense approach worldwide.
Fractional Ownership is property partnership, organized and seamless, created for the investor who loves the destination, plans on spending an average of a month per year, and demands to have ownership, as the hotel bills can never be resold.
Is it like a timeshare? Well, actually, just as using coal for fueling your hot water is like solar power, meaning they both aim to provide comfort and both are sources of power, but have different impacts overall.
Sunshine is sustainable power; coal has higher cost in many other ways than cash, so we now know, as we are enlightened 10 years on by the transformation of awareness of our environment.
Or, think about this one. Does your cell phone today look and do what the one you had 10 years ago did?
Simply put, timeshare can depreciate in value, Fractional can appreciate.
Where’s the smart money going you think? The impact of property partnerships through fractional ownership is that the investor has an underpinned slice of the equity of the asset.
In layman terms this means they get a fair share of the deed to the property, according to their contribution to the partnership. There is no solution out of the cookie cutter or the bright shiny box, but there are some benchmark indicators to help any investor make smarter, more informed choices.
First of all, is this really a second home that would be used part time, say for a month or two or three per year? If this is the case, hold your horses until you get the facts on the rest of the checklist.
- Is the property offer packaged with a competent property management company offer, insuring that the in home experience will be seamless and a fair contribution per year is enough to keep it that way?
- Does the legal structure stack up, and yes, as there are many countries in the world, there are many systems, so have your own people give a good head to toe inspection.
- Is there any recognized organization that will offer lifestyle benefits, or possibly even the opportunity to place your “Partner-share” into a pool in any one year, and allow you to cash in on other benefits such as using a similar home elsewhere? (Some very good ideas got better; remember the wooden wheel, think Pirelli)
- Is there an exit strategy that is transparent and provable?
- Many offer this as safety net for investors over either a fixed time such as 5 or 10 years, or options for other partners to snap up anyone’s partnership share when they want to sell. Know your developer and their background. The same would apply if you were buying a house outright.
- Market comparables. Know local market conditions and amenities nearby or coming soon.
- Understand in writing what services are and will be available and exactly what other privileges you will have access to, paid and unpaid.
- This goes for cleaning, repairs, insurance provisions, all questions once again you would ask when purchasing a home 100%.
- If you are promised a rental value, ask for clarity and validation of the promise, so that your perception matches reality and meets your expectations.
- When do you have access to the asset, are the terms of reservation clear and convenient for you.
A new trend in partnerships for property is Crowd Purchasing; Crowd Funding the acquisitions of property is gaining traction.
With all of the above in mind, it seems that more and more investors are using these property partnerships to get the maximum out of their buck, and tapping into the buying power of other like-thinking people to exploit the opportunity of luxury tribal living.
Maybe it is better this way than being out on your own in the cold winds of uncertainty, hence the billions of dollars that are shifting over to new Property Partnerships. For more information, contact [email protected]
About the Author:
Michael J. Tolan is a PR Management Consultant at World Class Institute of Innovation, a Sebchem Consulting House L&D division, with 25 years experience serving clients in in 15 country markets. He has been an advocate and speaker on transformation of business trends, innovation, leadership and is an active in seminars and events throughout the EU and Middle East and Asia.
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