10.2 A Pragmatic Approach to VRP

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membership model is an early adopter. It’s a tribute to Jack Nicklaus and his visionary nature that he sees the potential.

10.2 A Pragmatic Approach to VRP

In every family, there is that one person—the one who’s got it all fi gured out. Think of the uncle you turn to for fi nancial advice. The cousin who hooks you up with the best vacation experience of your life. The niece who knows exactly who to call to get the ultimate dinner reservation—two hours before you want to eat. Today, you are that person because you are the fi rst to learn about the Residence Clubs vacation ownership product.

As you no doubt understand, when you invest in a timeshare, you receive very little for your money and you can’t get out of it. You own nothing; you control nothing.

Incoming Producing Residence Clubs are a whole new ball game. Instead of getting locked into a timeshare that gives you nothing back, or a fraction of a vacation property deed with very little fl exibility or value, a Residence Club membership is the best of everything . . . the best balance between family fulfi llment and fi nancial fulfi llment, at a price point that makes actual sense. This model has never been done before, because it’s never been possible before.

The Income Producing Residence Club is an entirely new product o ering. It provides rental income generated by a vacation home with downside protection in internationally branded, resort communities in top vacation locations. Members can also enjoy the use of luxury properties in over 200 locations around the world and enjoy hands-off third-party resort style rental management of their homes.

This product is a way to enjoy a luxury property and create an additional income stream for individuals and families to build wealth. The innovative Income Producing Residence Club program is being utilized by major brands worldwide while the Jack Nicklaus Residence Club expands internationally.

WEALTH AS A VACATION

Professionally managed by one of the top hospitality management companies in the world, the Income Producing Residence Club program is the perfect balance between family enjoyment and smart economics for its members. VRP Equity is bringing projects in the Bahamas, Belize, Puerto Rico, and the Cayman Islands into its unique Residence Club model into the next 12 months, as well as properties for those who like to ski and fi sh in Colorado, Maine, and in Canada.

The Uber of VRP It’s a vacation product for the new decade, for the new millennium. It’s a vacation membership that provides a young and growing family with fun usage of a luxury property for multiple weeks per year. It provides solid and continuous cash fl ow, and the ability to exchange your membership for stays all over the world. When you purchase an Income Producing Residence Club membership, you’re stepping into a new world of vacations and of possibilities.

The innovators behind Income Producing Residence Clubs wanted to make a new kind of vacation product: one in which the product is profi tably liquid. By giving Income Producing Residence Club Members the option to rent out a property on a short-term basis when they are not using it, Residence Clubs are able to show profi tability—rental income—over time.

The properties in the membership pool are part of a premier hospitality group’s booking and marketing system, so fi nding short term renters is never the member’s concern. Unlike other investors in short term vacation rental properties, you’re never going to have one home in your membership pool undercutting others on price. For this reason, you can evaluate a Residence Club membership in the same way you’d look at a piece of commercial property.

None of the existing vacation products on the market today open you up to the opportunity to earn any kind of real income from shortterm renters, because your usage is only 2–4 weeks. It’s diffi cult to make revenue that way.

Residence Club members are entitled to up to 10 weeks of control

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over one home under a very strong brand name. For example, the fi rst Residence Club is under the Jack Nicklaus brand. Your home is maintained and managed by the very fi nest luxury hospitality management company, the same company that manages Margaritaville, Encore, and other premier vacation destinations around the globe.

Most families enjoy a 10-week membership. They vacation for three of those weeks, and choose to place seven of the weeks they control into the Residence Club rental program. At a level of 20–30% occupancy, all the bills get paid. So, owners get usage of the property each year without expenses. What happens when your membership time is rented at just 50% occupancy? That’s when the income generation for your family can be achieved.

The Income Producing Residence Club membership is a signifi cant improvement upon, and hybrid of, all the best vacation property products that have come before it.

Sophisticated investors have known for years that it’s not necessarily ownership of a resource that makes profi t; it’s control. And the good news for those who understand this concept is that control can be gained for a lot less of an upfront investment than owning. Everything is headed this way. In fact, you can buy a subscription to a BMW, a Volvo, or a Land Rover right now. And this kind of model is only going to become more and more common as the decade unfolds. You are no longer stuck with timeshare or fractional ownership when it comes to designing the best vacations for your family.

Comparing Residence Clubs to Timeshare Timeshare is basically the right to purchase some weeks at a discounted rate, along with the option to stay other places around the globe on a discounted basis through exchange programs. It’s really no more than that.

A Residence Club is similarly priced, but it’s a much more equitable, fair, and honorable way of doing things than your traditional timeshare off ering.

I’m not saying timeshare is a bad deal. I’m just saying it’s not a

WEALTH AS A VACATION

good deal. Again, it’s essentially the right to buy discounted use time of a larger hotel room.

Residence Club membership is not about the underlying value of the real estate. Whether or not you buy real estate is going to depend on its price for the income it’s going to generate. Right now, the income is relatively high in Central Florida versus what you’re actually paying. Using that metric, this market is off ering a depressed purchase price.

Why do I say that? Well, in New York City, your cap rate is three percent on a residential real estate product. Up here where I am, a cap rate of a commercial building is seven and a half. In Central Florida, you’re talking about a cap rate of 11 percent.

This new vacation home product doesn’t even factor in the underlying appreciation value of the real estate. If a property devalues—if the market drops or there’s a correction in the market—Residence Club members just keep renting and enjoying usage time. We are covering cash and making a positive rate of return. Again, these things break even at around 30 percent occupancy.

Residence Clubs: Born in Florida There are 75 million tourists visiting Central Florida each year; the overnight rental market there is one of the strongest in the United States. The Disney corridor is immune to off seasons, it chugs along 12 months of the year in some capacity. It’s a good market to establish your fi rst foray into this type of thing as its rental market is, and has been, very stable.

This Residence Club product is just a pragmatic approach to vacation rental property investment. Very simply, it’s a small segment real property participation product that cash fl ows. Personal usage is there as well. You can take a percentage of your portfolio, tie it up, get an attractive rate of return on it, and have some fun with it.

The intent is to make it investor-driven rather than usage-driven. You want the mentality to be, “Let’s drive the rental income of this thing fi rst.” Because that’s going to ensure that your bills are paid. Forever.

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The Final Word on the Residence Club Innovation This innovative Income Generating Residence Club model allows residents and their families to vacation in ultra-luxury homes with stellar amenities, located in the most popular vacation areas around the globe. It is also smart in terms of family fi nance. The fi rst Residence Club, the Jack Nicklaus Residence Club, is opening on Jack Nicklaus golf courses across the globe, providing families and golf groups many beautiful, exciting, and exotic locations to explore.