Frequently Asked Questions
Collective Asset Ownership allows a small group of investors, typically 6-8 families, to acquire shares in a Limited Liability Company offered by Lifestyle Asset Group with that LLC becoming the legal owner of the vacation home.
Shareholders forward a one-time capital contribution to invest in the LLC, which ranges from $150,000 – $765,000, depending on the LLC, and these funds are combined and used to acquire the property in all cash. Thereafter, each shareholder only pays their prorated share of the actual operating costs and LLC management fees.
Shareholders of the LLC will be entitled to enjoy the property for approximately 6-8 weeks a year using simple reservation process where there are no assigned specific weeks. Rather, owners can come and go based on availability and a rotating priority reservation protocol for peak holidays and seasons. Shareholders can sponsor unaccompanied guests.
Depending on the LLC, the term is 6-8 years from the closing date, which mirrors the average time most people hold on to a second home. At the completion of the term, the property is sold and the shareholders will first receive back their original capital contribution plus an equal share of any gains in the value of the property that may have accrued over the years.
For example, if a property valued at $4.275m is acquired in 2018, has an 8-year LLC term, and is sold in 2026 for $5,850,000, the first distribution would be the return of $591,000 to each shareholder and then the net gains will be shared equally by the eight shareholders, each receiving an additional $140,325, for a total of $731,325.
No and here is the difference: In a fractional offering, there are several weaknesses in the model that compelled us to do something very different. First, there is simply no demand for the resale of a fractional real estate interest once you decide you want to sell. As the fractional developer earned their margins on the front end of the transaction during the fractionalization process, with markups of 50% or more on the real estate being offered, it is not uncommon for a fractional real estate owner to get back only 30%-35% of their original investment when they sell their share …if they can sell it all.
Although on the surface, our LLC structure is similar to a fractional offering as it does involve 6-8 owners of a single vacation home, creating the appearance of a 1/6th -1/8th interest, but any resemblance to a fractional product ends there.
Every commercial fractional project in the United States involves multiple units that are generally identical residences with a typical fractional project offering over 20 residences with 160 or more owners. If you own an interest in a commercial fractional project, you are very likely to stay in different residences each time you go. Each LLC, conversely, owns ONE stunning luxury residence that only 6-8 shareholders call home. We have departed 180 degrees from the commercial fractional product with hundreds of owners and dozens of residences and personalized it completely. There is nothing like this innovative option anywhere within the real estate ownership market.
The other glaring weakness of a fractional real estate product is the cumbersome, complicated and very structured reservation process. This is a necessary evil when there are 200 owners and 25 villas. As one of only select group of partners, in this example just 6, you reserve your weeks in a process where shareholder #1 (by order of commitment to invest in a property) chooses their first week, then shareholder #2 selects their first week, shareholder #3 picks their first week, and so on until shareholder #6 chooses their first week. Then, the second week of use chosen by each shareholder is in the reverse order — where shareholder #6 chooses their second week first and shareholder #1 selects in the 6th position. After these 2 weeks are selected, shareholders can make additional reservations and can do so at their leisure and in real time as the year progresses. Each shareholder will have access to the vacation property for around 6-8 weeks a year (3-4 weeks for a half share).
All shareholders will pay their prorated share of the annual expenses and they billed quarterly. This covers all operating expenses associated with home ownership: property taxes, insurance, utilities, homeowner association fees, miscellaneous repairs and maintenance, K-1 tax return filings for the LLC, etc.
It varies by LLC, but on average, with access for around 42 nights per year and total annual costs of $20,000 – $24,000 for ownership in a $4m house, the cost per night is only $475 – $570, which is the same cost of a single 375 square foot luxury hotel room. THAT is the undeniable magic of the Collective Asset Ownership innovation of Lifestyle Asset Group. The advantage of our “Collective Asset Ownership” model becomes quite obvious when considering the important measurement of cost per night. And to the degree that the property increases in value over the term, those increases help, if not 100% offset the annual costs during the term, potentially reducing these expenses even further. Applying a 4% appreciation on a high-end property in a sought-after vacation destination, it is possible the actual net cost per night for you to vacation in a multi million dollar home could be absolutely free.
Yes, each LLC has a rental option for any unused weeks and receive income/credits to offset your annual fees.
Yes, and it adds tremendous additional value to the shareholders. Bottom line: between the other LLCs we manage and the locations within Elite Alliance, our strategic partner that is the leading exchange service provider for luxury private residence clubs around the globe, you can exchange your allocated weeks for travel to over 70 coveted destinations.
To learn more about the four and five star properties of Elite Alliance, visit www.elitealliance.com.
Each LLC will admit a pre-defined number of shareholders to the LLC and shares are offered at the full share and half share level. If your time in the LLC is likely to be only 3-4 weeks a year, the half share interest is perfect. And the economics are very simple: 50% of the full share purchase price and 50% of the full share annual costs.
No debt is permitted within the LLC. In addition to not wanting a bank as a lien holder, an all-cash deal eliminates the cost of debt service as that would sharply increase the annual costs.
Here is an example of how the LLC capital raise is allocated for a $4,275m property with 8 shareholders:
- Eight shares are offered at $591,000 per full share or $295,500 for a half share. The total capital raised within the LLC is $4,728,000.
- A destination may require a 3% transfer fee of the purchase price, or some other tax, for example, and that is included in the share price.
- Lifestyle Asset Group’s subscription fee for the expertise, sales and marketing of the eight shares and efforts associated with the selection, purchase and closing of the property is 5% of the capitalization.
- A reserve of $90,000 is created for post-closing improvement plans and ongoing upkeep and maintenance with any unused funds will be returned to each shareholder at the end of the LLC term.
- $4,275,000 will be used for the all- cash purchase of the property, which is fully furnished, beautifully appointed, and 100% turn-key.
Getting involved is easy and requires the following steps only:
a) When you move forward as one of the shareholders in an LLC, you will remit by check or wire transfer a fully refundable Reservation Deposit that will be held in an escrow account. Upon the receipt of your deposit, you will be given a priority number, i.e. 1-8, that will be used in the reservation selection process, as described above.
b) You will receive the Offering Documents of the LLC which include the Operating Agreement, Subscription Agreement, Reservation and Lodging Rules, and other relevant information associated with becoming a shareholder. If you are not in agreement with any of the provisions of the agreements, you can request a full refund of your Reservation Deposit and it will be returned to you within 72 hours.
c) You can request a tour or if possible, a “discovery stay” at the property. If the house does not meet your expectations or your personal interests, your deposit will be refunded.
d) Following the approval of both the Offering Documents and the tour of the home, you will receive a funding request for the balance of the LLC share to be funded into the escrow account which can only be used for the closing of the property. Occupancy will begin shortly thereafter.
That’s it. No surprises, no risks, no pressure.