What Is Real Estate Co-Ownership?
Real estate co-ownership allows multiple buyers to share ownership of a property rather than one individual or family purchasing 100% of the home.
In a professionally structured co-ownership model, each buyer holds a defined ownership interest and shares the costs and benefits of owning the property according to that interest.
For vacation-home buyers, this can provide access to a higher-value property while avoiding the cost and responsibility of owning a second home entirely on your own.
How Does Vacation Home Co-Ownership Work?
The exact legal structure varies by company and property.
With Cohana Homes co-ownership, prospective owners are brought together into an exclusive group. Cohana facilitates the creation of a customized Single Purpose Entity (SPE)Limited Liability Company, or LLC, which purchases the property.
Each buyer becomes a member ofthe LLC, with their ownership interest based on their proportionate contribution toward the purchase price.
Instead of one buyer providingall of the capital needed for a luxury vacation home, multiple owners combinetheir purchasing power.
That can open the door toproperties and destinations that might otherwise require a significantly largerindividual investment.
How Cohana's Structure Differs From Traditional Fractional Models
Cohana's model is built arounda small cohort - typically 2 to 4 co-owners - participating through onesingle-purpose LLC that acquires the entire home. Rather than splitting the underlying property title into numerous separately marketed micro-interests, the home remains a unified real estate asset owned by the LLC.
That structure is also intended to support a whole-property exit. The ownership timeline is established for the particular property and governing documents and may, for example, be 3, 5, or 8 years. At the planned exit, the co-owners sell the home together on the conventional whole-ownership market rather than relying solely on a market for individual fractional interests.
Cohana also states that itdoes not add inflated fractional-interest premiums to the co-ownership interests. Applicable operating, maintenance, and management expenses are divided proportionally based on each partner's ownership percentage.
What Do You Actually Own?
This is one of the most important questions to ask when researching shared vacation home ownership.
Under Cohana's structure, theLLC is the legal owner of the home, while each buyer owns an interest in thatLLC.
That means co-ownership isn't simply about reserving vacation time. There is an underlying real estate asset behind the ownership structure.
How Is the Property Managed?
Owning a vacation home involves much more than purchasing it.
There are utilities, insurance, property taxes, HOA fees where applicable, repairs, maintenance and countless other details.
Cohana's model is designed tomake ownership more hands-off. Cohana provides property management andmaintenance, scheduling, and personalized travel and concierge services.
Annual operating expenses areshared proportionally according to each member's investment.
The idea is simple: share thehome, share the expenses and reduce the day-to-day responsibilities associatedwith second-home ownership.
Generally, use of the property is based on the percentage of ownership.
Usage is based on the percentage of ownership.
In the Cohana model, a purchaser buys an interest in the LLC, and that entity owns the residence. A co-owner is entitled to possession of the residence while holding entity interest. The co-owners will decide how to use the home and the operating agreement provides options for allocated use. It could be 3 fixed months, or a popular option is 3 months use in 1-month increments spread throughout the year with a priority selection order that rotates one position annually.
Why Consider Co-OwnershipInstead of Buying an Entire Vacation Home?
For some buyers, purchasing 100% of a vacation property makes perfect sense.
For others, the question is different: Why pay for 100% of a home that you only plan to use part of they ear?
Co-ownership can allow buyers to allocate less capital to a single property while still enjoying the benefits of having a vacation home.
It may also allow buyers to consider higher-quality homes or more desirable locations than they would if purchasing alone.
Is Co-Ownership Right for You?
Real estate co-ownership maybe worth exploring if you want a luxury vacation home but don't necessarily need—or want—the expense and responsibility of owning the entire property.
Before purchasing any co-ownership interest, buyers should carefully review the ownership structure, operating agreement, expenses, scheduling rules and exit provisions and consult their own legal, financial and tax advisers as appropriate.
Want to see how Cohana Homes co-ownership works? Explore available vacation homes and discover a different approach to second-home ownership.
