Co-Ownership + Short Term Rental

[Jeff Klonowski]

I'm currently exploring a new build construction as both a vacation home + short term rental. However, I'm looking at a scenario of co-ownership consisting of 4-8 investors. The idea is each investor gets a fractional percentage ownership in the property (think similar to Pacaso) + an allocation of time to use the property as a vacation home. The remaining availability would be scheduled out as a short term rental. In the case of Pacaso, you only have an ownership stake with rights to use the property + tax benefits. There is appreciation potential, but no additional cashflow opportunity. 

In this scenario, the owner(s) would get:

1.) Access to a vacation home

2.) Appreciation potential

3.) Tax benefits

4.) Cashflow as a short term rental when not in use by a co-owner. The primary goal would be to utilize the cashflow to at worst break even on costs associated with financing, management and maintenance costs. Ideally, we finance no more than 50% with long term debt. 

Other notes: 

- This will likely be setup as a 506(b) or 506(c) 

- Land/Lot is already secured and currently aligning an architect for design.

- Goal is to have property built & ready for use / short term rentals by Spring 2026. 

- Location is Central Wisconsin in an up & coming vacation area. 

Has anyone done this before? If yes, any key learnings or considerations? 

[Neal Z.]

It's an interesting proposition, but my first inclination is how is time allocated to the possible 8 investors and how much time is allocated for owner use vs revenue driving use. 

Concern would be, if say 8 people all get 2 weeks out of the year, that's 16 weeks it's not making money. More often than not, those weeks would be taken during peak demand times as that's when everyone wants to be traveling to the area. 

Unless there's some parameters around specifically revenue generating weeks and owner use weeks, could get messy. 

For that reason, I'd be concerned with how well the property can perform to cover your costs and get you to break even. It'd have to be a stellar property to still perform well enough outside of these owner use weeks.

Someone gotta operate it, so guessing maybe another 20% of revenue goes to a mgmt company.  

Could get tight..