property
The dream of a holiday home: What lies behind the idea of co-owning
Holiday home in Mallorca: Many people dream of this, but financing it is difficult
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With co-owning, several owners share a holiday home, the costs and the risk – that’s the idea. However, buyers are taking a risk; there is currently a lack of experience
Buying a holiday property is generally not for the faint of heart. Purchase prices, especially in popular regions such as the Adriatic or Mallorca, have recently risen significantly. For Mallorca, the real estate portal idealista.com recorded an increase in prices of 10.5 percent for the period January 2022 to January 2023. The purchase price can easily exceed half a million euros, especially in tourist hotspots like Mallorca or ski resorts like Ischgl in Austria.
According to a study by “Finanztest”, banks are particularly cautious when it comes to loans for holiday homes: four out of 20 banks surveyed stated that they do not finance any holiday properties at all, reports “Finanztest”. The banks that agreed to provide financing demanded interest surcharges because they classified the prospective buyers as investors.
Co-Owning: With the all-round carefree package for a holiday home?
Start-ups like Myne or Lazazu want to solve all of these problems by relying on the concept of co-owning when purchasing holiday properties. Up to eight buyers can purchase a holiday property together at home or abroad. This is intended to minimize costs and effort. The costs for maintenance and administration are incurred all year round. For example, through Myne, interested parties can buy an eighth of a penthouse with sea views on the Italian Riviera for 249,000 euros. There are also listed properties on Lazazu, prices for shares start at 125,000 euros. Myne only requires equity capital of 50,000 euros; buyers finance the rest either themselves or through the start-up.
The providers of the co-owning concept also take care of the selection of co-owners and legal matters. Lazazu finds and screens two to eight “like-minded” buyers per home. The start-up Myne transfers ownership of the property to a special purpose vehicle (SPV). The buyers of the property then hold shares in the SPV. Your property will be registered in the land register, as with a regular property purchase. And finally, the start-ups also help with leasing, as this can be time-consuming and cost-intensive.
The downside: hanging along, caught up
The first hurdle lies in the financing of a co-owning share. If the buyer decides against a loan through the start-up’s financing partners, the air becomes thin: “We observe that construction financiers tend to exercise caution when co-owning holiday properties,” says Herbert Luckert, managing director of the Austrian financing expert Infina. Consumer advocates also comment in media interviews reserved. In many cases the question of liability is unclear. This means that each of the co-owners can be liable for the entire debts of the property, even though they only own a share of the property. Co-owners also have to decide together whether to sell a property. Only if everyone agrees can the property be available on the market. If a co-owner wants to get out, get his stake back or perhaps even realize profits, the other owners don’t have to go along with it. It is still unclear whether there is a market for shares in holiday properties, says Zoran Vujovic, head of capital investments at the real estate company Grossmann & Berger.
Because less capital is used, the individual’s risk is naturally reduced. But that doesn’t make co-ownership of a property more profitable: the rental income, divided by several, is also lower. In principle, you should not overestimate the earning power of a holiday property.
The decisive factor is the utilization, which is often lower than expected, says Vujovic. There is a start-up phase, an establishment phase and only after some time a full phase in the rental of holiday properties. “In the end, there should be an occupancy rate of at least 50 percent per year, otherwise the rental is a loss-making business,” says Vujovic. In the first few years, however, you can expect 30 to 40 percent, and later, if things are going well, 50 to 60 percent, depending on the situation, writes “Finanztest” in a calculation example. With co-owning, the start-ups also earn money – this further reduces the income per co-owner.
The co-owning concept could work
In the long term, Vujovic can well imagine that co-owning will work. He advises initially observing the start-ups for a while, as the business model is quite new and untested. Financial expert Luckert sees it very similarly. Particularly in markets with high real estate prices, co-owning allows a broader group of buyers to enter the market and spread costs and effort across multiple shoulders. If you can imagine sharing a property with others, you may have to be a little patient. The prospect of less stress surrounding your holiday property can be the first step towards recovery.