“ The times, they are a changin” (Bob Dylan)
The National Association of Realtors (NAR) recently released the 2016 Vacation Home results and the cry for change and innovation in this sector is deafening.
Purchases of vacation homes were down a whopping 21.6% from the prior year, with closings at their lowest levels since 2013. Vacation home values appreciated by greater than 4%. 72% of the closings involved mortgage debt, up a full 10% from 2015.
What is happening here?
Part of the puzzle missing in this data, and it is a big piece, is the average days of use by the typical vacation home owner. That number hovers around 30 days/yr. The approximate 150,000 less buyers of vacation homes from the year prior are very likely to say something that we hear every day: “ I simply cannot justify the economics of owning a second home in my favorite destination, despite my immense interest to do so, if I am only going to use the house for around 30 nights per year. It just doesn’t make financial sense”.
Sure, many of the 721,000 second home buyers last year plan to rent their second home with the hope to create rental income to offset the material costs of owning and maintaining a vacation property. But the decision to go that route is a slippery slope. Let’s start with the most significant fact in the decision to rent a vacation home: generally, if you enjoy the home for more than 14 days per year, the IRS considers the second home to be for “personal use” and the range of expenses that are tax deductible and associated with a rental property become ineligible.
Beyond that deterrent, which is a biggie, is the time, effort, hassle and even risk that comes with total strangers occupying your vacation home. Lets say, for example, the rental application is completed by William Johnson from Madison, Wisconsin. What William left out is that he is the president of the largest frat house at The University of Wisconsin and that quaint beach house that is ideal for 6, 8 tops, will have 20 frat boys celebrating....well... anything.
People are clearly challenging the sensibility of buying a vacation home.
The 21.6% decline in sales from the 2015 reflects that hesitation. Is there a smart, sensible and affordable way to own that dream house in your favorite destination? Let’s face it, those three words seldom are used when discussing the purchase of a vacation home. That is unless you are talking about Lifestyle Asset Group’s ground breaking Single Destination LLC Offering.
Imagine one remarkable vacation home at the beach. A price tag of $2,000,000. Ouch. But wait. Imagine that you are one of 8 like minded people who collectively own and share in the purchase costs AND share the annual operating costs. Suddenly, everything changes. The $2,000,000 becomes $250,000 per family and the annual operating budget of $100,000 becomes around $8,500 per family. The average use? Yes, 30-35 nights a year; the same average use for those who are burdened with 100% of the purchase costs and 100% of the annual costs.
Rethink Vacation Home Ownership with Lifestyle Asset Group
This structure is not a fractional as that industry is even softer than the traditional vacation home industry. This structure is a Regulation D securities offering or said a bit differently, a limited real estate partnership with the distinction that the real estate just happens to be a fabulous vacation home in your favorite resort setting. And you enjoy somewhere around 30 days a year there with family and friends, making memories of a lifetime. But in a sensible and affordable way and all 100% hassle-free.
There is a renaissance happening in the vacation home sector and it is being led by Lifestyle Asset Group and the Single Destination LLC Offering. One remarkable vacation home with 8 like minded owners. Simple.
Whoever said you should never mix business with pleasure most surely did not see this coming. And as the data and results show, the vacation home ownership options beg for an out of the box solution.
Why chose Lifestyle Asset Group?
Careful market selection, sound investment strategy and quality operations are at the core of Lifestyle Asset Group’s collective ownership model. Quality is not an act, it’s a habit. At Lifestyle Asset group, we have an unbending, unyielding commitment to your vacation home-ownership and travel experience.
To learn more about the next generation of vacation home ownership, please connect with us today.