Transcript

You’re listening to the divieight Podcast. The following is part two of our examination of a Colorado condo co-ownership case study. Part one concluded, posing the question, how do the co-owners actually take title?

Okay, so agreements are drafted, maybe signed. How do the buyers actually own their share? How has the title held?

Right, so buyers own what’s called an undivided interest in fee simple title.

Okay, that’s a bit legalese. Undivided interest in fee simple. What does that mean practically? Fee simple is like the best kind of ownership, right? Full ownership.

Yeah, fee simple is the highest form of ownership. You own it outright, no one else has a higher claim. And undivided interest means each owner has a percentage stake in the entire property, the land, the building, everything alongside the other co -owners. You don’t own like just bedroom two or the third week of July.

You own a piece of the whole thing.

Exactly. And the sources mentioned various ways to structure this, but they often recommend taking title through an LLC, a limited liability company. They say there are three or four good reasons for doing it this way.

An LLC, okay, an attorney handle setting that up.

Yes, an attorney oversees the LLC registration. And while the source doesn’t list all the reasons for the LLC, typically in co-ownership it’s used for things like limiting the personal liability of each owner, keeping property issues separate from personal assets, and it can sometimes make transferring shares a bit easier down the line. It kind of bundles the ownership into one legal entity.

Okay, that helped clarify the structure. Now, with eight owners sharing costs and decisions, administration sounds like it could be a real headache if not handled well.

Absolutely. And the sources present smooth administration as critical to the whole worry-free experience they promise.

So how do they manage that?

The model uses a third-party property administrator. This administrator handles all the shared financial stuff, paying the property taxes, the utility bills, the insurance premiums, managing the ongoing operating costs, and they also coordinate the general upkeep of the property.

Is that the same as regular property management like if you were renting it out full-time?

They say it’s distinct. It’s not focused on maximizing rental income like a typical property manager might be. This administration is specifically aimed at being total worry-free for the owners. The goal is for owners to just show up and enjoy the place, not get bogged down and managing shared bills or arguing about who fixes the leaky faucet. They do note though that professional housekeeping is arranged after each owner stay and that cost is paid directly by the owner who just used the property.

Now what about financing? We started this whole conversation talking about how tough mortgages are. Can you get a loan for just one of these shares?

According to the sources, financing for these individual shares is generally not available right now.

Oh, okay.

But their argument goes back to the affordability point because the cost of the share itself often significantly less than a traditional down payment on the whole property, a cash purchase becomes much more realistic for many people.

So you might not need financing if the share price is within reach for a cash purchase.

That’s the idea. They actually recommend a cash purchase for numerous good reasons, which likely relates to simplifying the whole transaction and ownership structure, not having multiple lenders involved for different shares of the same property would certainly make things cleaner.

Right, that makes sense. Okay, so cash is preferred, maybe even necessary. Where do real estate agents fit into all this? Are they involved?

Very much so. Agents earn their sales commission just like in a standard sale. The facilitator company, divieight, says they actively advocate for using agents.

So they work with agents, not around them.

Correct. They position themselves as facilitators acting on behalf of the buyer group to put together an offer, but they emphasize they don’t take any action without the buyers okay. And importantly, they stress they are not selling shares in properties they own themselves, they’re helping other people buy or sell shares in existing homes or newly acquired ones.

Okay, that clarifies the roles. So let’s say you bought your share, the structure is in place. How does the actual using of the property work with eight owners coordinating who gets to be there when, sounds potentially tricky.

Yeah, scheduling is key. It’s all coordinated using a use schedule, which is actually an attachment to that main operating agreement everyone signs.

How much time does that usually get you per year?

A 1/8 interest typically translates to about six weeks of use spread throughout the year.

Six weeks. That’s a decent amount of time.

It is and This schedule is designed so that owners get time across all four seasons in a mix of different periods. The use periods are generally assigned sequentially, often a week at a time. And to make it fair over the long haul, the use schedule actually adjusts and rotates each year.

Rotates? How?
It means the same owner won’t always get the same holiday week, year after year.

Smart.

Seems crucial.

Yeah.

Now, what if an owner can’t use their allocated week? Can they rent it out? You mentioned that earlier.

Yes, the ability to rent out your time is generally built into the transaction documents and the operating agreement. So the framework allows for it. But the sources also note that the group of co-owners, all eight of them, can collectively decide and agree not to allow any rentals if they all prefer to keep the property strictly for personal owner use.

Okay, so the group has control over that rental policy. If rentals are allowed, and say I rent out my week, is that rental income shared among all eight owners?

According to the documents described in the sources, no. Rental income is not shared among the co-owners.

Oh, interesting.

If you, as an owner, choose to rent out your allocated week, that income is yours alone.

Okay, so the benefit and maybe the hassle of renting goes just to the owner whose time it is. Got it. Let’s just quickly touch on a couple of other practical things mentioned and maybe recap the role of that facilitator company divieight.

Sure. So besides the use schedule and sharing expenses, that operating agreement also spells out how the owners make decisions together, you know, voting on things and it outlines their obligations to each other and the property. The co-owners themselves collectively set or approve their own annual operating budget and figure out any assessments needed based on that budget.

Right, they’re in control of the budget. Okay, so what about divieight itself? What’s their expertise, their specific role in all this?

divieight positions itself as the expert facilitator and ongoing administrator for this whole independent co-ownership thing. They actually state they invented the Indy-Co concept and have trademarked the term.

Oh, okay. They claim originator status.

Yeah, and they describe their team as having like over a hundred years of combined experience in relevant fields: real estate investment, law, insurance, business management… So they bring all that know -how to the table.

And their job is to help find the matches, get the documents sorted, provide that ongoing admin support we talked about.

Exactly. They provide the framework, the secret sauce documents, handle the complexities of managing a property with multiple owners, all aimed at making it a smooth, straightforward experience focused on just enjoying the home.

And the founder, Mark Chesney, he mentioned him earlier, he’s still involved.

Apparently so. He gives live presentations, and the sources say he’s even written a book about co-ownership success stories using this model.

Okay, and how does divieight actually get paid for doing all this facilitating and administrating?

Their compensation comes from that initial refundable reservation, the PRA payment we talked about.

Right, the deposit.

Yeah. That payment covers various upfront costs for the group legal fees, appraisal, inspection analysis, that kind of thing. And it also covers divieight’s administration services during the setup and potentially on an ongoing basis as well.

So it sounds like they bundled together all the necessary legal and administrative expertise needed to make this shared ownership structure actually function properly for the owners.

That’s exactly the service they seem to be providing, taking that burden off the individual owner so they can just focus on the fun part using their vacation home.

Okay, so let’s try and bring this all back together. Independent co-ownership, or Indy-Co, as we’ve seen it described in these sources, it really does offer a potentially quite compelling alternative pathway to owning a piece of that vacation home dream.

Right. It seems squarely aimed at tackling those big challenges of super high costs and maybe underutilization that come with traditional second home ownership. It does that by spreading out the money side and the admin hassle across several owners.

And the core benefits they keep highlighting are pretty clear. First, that significant affordability boost compared to buying the whole place yourself is really striking. Then there’s the reduced financial risk, less responsibility day to day, there’s flexibility built in to sell your share or potentially rent it out, and this promise of streamlined, sort of worry-free administration.

And it’s all presented as a way to make that dream happen now, not some day way off in the future, which feels very relevant today.

And crucially, as you pointed out early on, It’s based on owning actual title, real property equity, which they strongly differentiate from just buying usage time.

Yeah, that ownership piece seems fundamental to the whole concept.

So we spent this time exploring how this specific model, independent co-ownership, applies to making second homes maybe more attainable, especially in this kind of tough real estate climate.

And when you think about the rising cost pressures, not just in housing, but across lots of different assets these days. And you consider the potential upsides of sharing resources, sharing costs.

Oh, that really makes you wonder, doesn’t it? Where else could a similar model of this thing? This idea of independent co-ownership, shared title, shared costs, professional admin, where else could that be applied effectively in the future? What other kinds of dreams or maybe expensive assets that feel out of reach for most people right now could this kind of approach potentially walk down the road.