Is my investment idea legal? - Posted by Maria

Posted by John Behle on May 22, 2000 at 15:42:44:

You might be able to do this with just some coupons or certificates that do not contain any ownership. They are just pre-paid certificates entitling them or anyone they assign it to to the rental time you propose. They should be subject to availability and good for certain time periods - i.e. 2000, 2001, etc.

You would then need to show the investor what the market rate of the proposed coupons/certificates might be and their savings and/or profit if they were to use or resell the coupon. It breaks down to $250 per week or $71.43 per night.

If the rental is seasonal, then you need to look at the rates at those times. The other question is also whether you could afford 20 weeks per year of your best time to be used. Could you still pay the debt service and have a profit left over?

On Timeshare or resort properties you can be looking at vacancies during the off peak times and/or management fees in the range of 50%.

You might need to put some restrictions on the coupons to exclude some of the peak time for cash flow purposes. Like a timeshare, there should be some cleaning fees, damage deposits, etc. They or someone they resell to could end up leaving the place dirty or causing some damage.

If the property is one that is in a complex and/or you have professional management or high demand - you could also give the chance to put it into the “rental pool” for their week and make a profit on the higher price.

Tread lightly in that department. They need to own the coupon without any guaranteed return or “investment management” on your part or you end up crossing over into securities areas.

Again, run it buy an attorney whatever approach you take.

When you get some data on rents, vacancies, management, etc. you might want to post it here and let us crunch some numbers on it.

Is my investment idea legal? - Posted by Maria

Posted by Maria on May 17, 2000 at 17:37:10:

Hi, I’m looking into buying vacation rental property in Vermont, but I have no money of my own to put down. I want to know if the idea I have get the money is legal. My idea is to advertise for 10 investors willing to invest $5000 each to have 2 weeks use each year of the rental property and place a five year limit on the deal. So in essense, they have a guaranteed rental house for 5 years that they can use 14 days each year. And would I still be able to rent out the house during other weeks? If anyone can give me any thoughts on the legal issues involved, I’d really appreciate it.

Thanks,
Maria

Re: Is my investment idea legal? - Posted by John Behle

Posted by John Behle on May 20, 2000 at 18:27:01:

What you are proposing borders on “Timeshare” laws and most (most likely all) states have laws related to timeshares, both in the sale and structure.

You may be able to create a form of lease option scenario and avoid the timeshare requirements, but you would need the advice of a good attorney.

You can do it, it just needs to be structured right. AND - it is a very creative idea. Congratulations.

Re: Is my investment idea legal? - Posted by Maria

Posted by Maria on May 20, 2000 at 18:52:43:

Thank you for your input, John. I do plan to talk to an attorney before any agreements are made or signed.

If the investors aren’t locked into specific weeks they can use the rental property, would it still border on timeshare law or be subject more to standard rental agreements? I’m hoping to run it more like a standard vacation rental, where they have to book their weeks ahead of time on a first come, first serve basis. Thanks again for your help.

Maria