Vacation Home LLC / Legal Partnership

[arew+4]

Interested in people's opinions/attitudes on the title subject. You can choose up to two answers

Would you consider joining/forming a LLC/ Partnership for the purpose of buying maintaining and renting a vacation property

 

[ibj40]

Didn’t form an LLC, which might have helped, but I naively purchased a house in Cozumel in the early 90’s. Those who I thought were friends assured me that they would help me keep it rented when I wasn’t there, and would ensure that it was maintained in between.

As CSN&Y sang in “Woodstock” - maybe it was the time of year or maybe it was the time of man - but when it was all said and done, on a cost per night, I could have stayed in the most expensive suite on the island and put money in the bank to boot.

There is so much more that needs to be considered than the form of ownership.

Like the old saying goes: “How can you make a small fortune on a vacation rental? Start with a large one!”

 

[mi000ke]

Have both purchased vacation property (in Grand Cayman, and in our case it has turned out to be an excellent investment all around, although not our primary reason for purchasing), and held investment property (not the Cayman property, though) in an LLC. The LLC was primarily to protect our personal assets in the event of legal action against us. Only the assets of the LLC were at legal risk. In the Grand Cayman case, it would have been too complicated and expensive to do an LLC, so we purchased liability insurance instead. In all cases all of our properties, including our primary home, are held in trust. Just one more level of obfuscation . Having done several business and real estate ventures with other partners, some family and some no relation, I would never again do a real estate investment deal (or any other business venture for that matter) with anyone other than my wife or children, but preferably alone. All our current RE investments are sole owner/beneficiary (me).

 

[caydiver]

I didn’t do it to buy a property in Cayman but I did to buy a dive op. In Cayman businesses are required to have a Cayman partner. We had many very good friends in Cayman but they were not Caymanian. We had a wonderful partner who came well vetted through the friends. We never had a problem. Flip side very dear friends had a family member in a business in the US. Suffice it to say it ended badly. The partner who got his share for work instead of seed money was lazy and incompetent and walked away with “his” part of the business. Just depends.

 

[arew+4]

With 25 votes in, I'm glad to see number 4 is at zero, surprised to see ten for number 1.

I have not voted but I'm at number three, some reasons why.

1. US financing is at historically cheap levels. Overseas financing is less favorable, shorter terms, higher rates, etc. With a equally stable well qualified partner or two, US home equity could be used to pay cash for the foriegn property and establish an escrow type account.
2. With a 10-15 year retirement window max usage in that period would be 4 weeks yr. Leaving 40 or more weeks a year open for rental. At 10-15 years, usage could be adjusted to 4 or 6 months per partner.
3. While rental income can offset some costs there are no guarantees. With a partner or two or those costs are cut in half or even a third. This reduces the opportunity costs of such a large solo investment.
4. The odds of finding some one with matching interest and means for this type of thing within family and friends circle can be rather small.

My 2¢

 

[Redfoot]

A wise man once told me "partners are for dancing, not business"

I would hesitate to go into an investment even with family. We own a small cottage that we rent through VRBO, and have had good luck. We did not buy it to make a profit, but it is nice to offset some of the costs with a few summer rentals weeks we are unable to go up there.

We have also been kicking around buying a condo on Siesta Key, FL for several reasons. Many of them have proven rental management programs with very attractive yearly returns. But, it is all very preliminary.