How To Buy A Holiday Home At A Fraction Of The Price

April 12, 2023 • Co-Ownership 411

Many of us dream about owning a luxury holiday home, and the fractional ownership model introduced by Kō in the APAC region is set to make that dream a reality for many.

Fractional ownership (or co-ownership) is already a well-established concept in other parts of the world (US and Europe) because it offers an innovative solution to holiday home ownership by allowing you to own a share of a luxury home for just a fraction of the cost.

This option also appeals to existing holiday homeowners that may want to sell back part of their property if it sits unused for a large part of the year, or if they want to unlock equity.

As a Kō-owner, you will be the true equity owner of the share you purchase, and be able to escape to your high-end holiday home as you please for a portion of the year that is equivalent to your ownership. To top it all off, all Kō homes are fully managed – offering a seamless, hassle-free and luxurious experience.

To learn more about Kō and our model, watch the recording of the webinar we ran in collaboration with Rich Harvey from our partner multi-award-winning Propertybuyer.

Things we discussed during the webinar include:

  • How the co-ownership model works in Australia.
  • How to buy and sell a fractional holiday home.
  • The pros and cons of fractional ownership
  • How to share the costs and usage.
  • How it is different to timeshare.
  • How the booking system works.
  • Extensive QA with questions from participants.

If you’re a prospective holiday home buyer or a property investor looking for an innovative and cost-effective way to own a holiday home, then this webinar is ideal for you.


(00:00) Rich Harvey (Propertybuyer) Well good afternoon everybody my name is Rich Harvey CEO of Propertybuyer and today we are having a fantastic webinar about how to buy a luxury holiday home at a fraction of the price and I’m joined by Ryan Fritch CEO of Kō.

And we also have Michael and Anna from Commonwealth Bank who will be joining us later to talk about some of the lending options that are available. So before we get started, just if you have any particular questions that you’d like to ask throughout the webinar please just jot your questions in the Q box at the bottom of the screen. We will be recording this webinar and sending out a copy of it to everyone who’s registered today and if you’ve got any questions we will be having a fair bit of time 15-20 minutes at the end of the webinar where you can log on and just send in your questions but as one of us are talking please just also just jot in your questions and we’d love to get to it wherever we can so let’s get started.

We’ve got a fair bit to get through hopefully it’s very practical and very engaging and you find it of interest. So what we’ll be covering today is talking about some of the issues of high-end holiday homes and luxury holiday homes. We’ll be talking about some of the pros and cons and me being an economist I’m quite analytical so we’ll be looking at the pros and cons and the upside and the downside how this particular co-model came about and how it works in Australia some of the top locations on where it does work and also the sort of criteria where these homes can be fractionalized so that’s a quick summary of what we’ll be looking at.

So firstly Ryan I’m going to go to you in a second but I want to ask you where did this co-concept come from and how does it work?

(02:04) Ryan Fritsch (Kō) To give a quick overview the whole idea is the fact that properties are underutilized in the holiday home space so we’re trying to improve the experience for holiday home owners and we do that through co-ownership so having up to eight individuals who invest in a property. But of course they’re the owners of the real estate and get the benefits of that but also get to use it and we’re the managers of that property, so they can just show up enjoy the property and leave. We do the rest. I’ll pull up my screen and do a quick introduction for everybody and as Rich mentioned I’m Ryan Fritsch co-founder and CEO we’ll do a walk through of just generally what Kō is, what we offer then as Rich mentioned we’ll jump back and get a little bit more in the technical side wrap up with Commonwealth Bank and then some Q&A. The only favour I ask is for everything financing-related and specific individual things that Commonwealth Bank won’t touch that can be a follow-on discussion because each one of those scenarios is a bit different for each person.

(03:25) So once again thanks everybody for the time we’re going to be discussing the first ownership platform here in Australia but I’ll touch on why this is the first but we’re here but we’re definitely not the first to globally. But before we get into that I want to just talk about holiday homes specifically so holiday homes are a lot different than your primary residence.

(03:46) It’s different than a traditional investment property for a variety of reasons and really if you boil it down it’s more than a home it’s also an experience you know if you think of and if any of you grew up with a family holiday home probably have quite a few really good memories really, great experiences that you have with your family and loved ones if you happen to own one or several nowadays you can say that there’s a lot of really great things about having that home away from home that you can jet off to.

(04:13) I myself have been a holiday homeowner for about 10 years as you can probably tell by my accent I’m originally from the US, have a property in Florida that I kept whenever I left a long time ago and somewhere that I can call home when I go back back to the states. That sounds all really good on paper and if you think about all the memories that you can make it is a great investment to have ,and it is it is an investment it is real estate you know if you look at historicals there are a lot of upsides to owning real estate.

(04:40) This is a bit of a different one because you’re dealing with a property that unless you rent it out it’s closed with the lights off and the door is locked most of the time, or if you’re doing short-term rentals, there’s quite a bit of management behind that so holiday homes are great, but there’s a problem with them. They’re costly to buy they’re costly to maintain and they’re just generally quite complicated to be the manager of. I’ll give you a very practical example for me.

(05:08) Because I have a property still in the U.S I was up at 4am this morning on a phone call with my property manager because I do short-term renters for my property, since I’m only there a couple weeks a year at best and we are dealing with just some some general questions that they have on some renovations that I’m doing. That’s not ideal and that happens way more than what most people like to admit. Practically speaking a Holiday Home is really only used not a quarter or less

(05:37) of the time and that’s been quite optimistic. If you talk to most people who own a holiday home it’s really only a couple weeks a year that they actually go there, so saying you know 20 of the time or so is then probably being a bit optimistic on what their actual usage is. So the other 80% of the time it’s you’re paying the bills you’re dealing with the issues if a pipe bursts there’s probably no one there that will even notice it and these are all just issues that you as the owner have to deal with or at

(06:04) best are managing a manager to deal with this and you have the costs involved with all of that. I started looking at this space myself because a company popped up in the U.S called Pacaso about two and a half years ago of co-ownership of properties so they manage it you split the costs and you don’t really have to do anything you show up enjoy the property and leave. And it got me thinking about my own home, why do I own 100% something that I only use a fraction of the time. So jumping into Kō what we really are

(06:40) is a business that provides a seamless home ownership experience at a fraction of the cost. So if you think of the term a holiday home anyone who owns a holiday home they probably don’t have much of a holiday in that home while they’re there. They’re dealing with the maintenance the upkeep and everything else so our whole idea is putting more holiday in your holiday home. Now this is not something that we just came up by ourselves like I just mentioned I was inspired by the company Pacaso in the US for my for my

(07:08) own property um but this is a global phenomenon that’s taken off in about the last two and a half years where Tech platforms with the correct operating and legal structures can take a property that they don’t own they don’t have any attachment to structure it in a way for the co-owners that makes sense for those individuals as the equity owners and that’s an important thing that I’ll get into is that the co-owners really are the equity owners of these properties Kō and all of these other platforms are

(07:36) merely service platforms making sure that you have a great great experience but this took off in the U.S back in 2020 moved through Mexico and throughout North America over into Europe as well this is just a small snapshot of some of the other companies there’s more than a dozen players out there that have scaled in the last three years but nobody has been doing this on this side of the world so we looked at this space about a year ago and said what would we need to do to make a really robust structure that is scalable across Australia and

(08:08) then key travel destinations for Australians. We’ll get into kind of the subtle nuances of how we’re structured because we are we do operate under a financial services license so we are licensed to be doing what we’re doing that’s for a more technical discussion but I just wanted to highlight that this is not new this is just new to Australia and if you go a layer past this and you think of similar asset classes the co-ownership of expensive assets is also nothing new to Australia either if any

(08:36) of you have heard of boat sharing or yacht syndication depending on what your talking about it’s a relatively similar model you’re taking an underutilized asset that otherwise would just be sitting there on the jetty splitting up the ownership so it gets to get ‘sweat’ quote unquote more effectively and it’s a lower cost for the purchase and the maintenance now to summarize what we do and there’s a lot behind what we do but that’s my problem not your problem from a customer perspective there’s

(09:08) really just three steps to buy book your time and then enjoy your time and enjoy your property what you’re actually buying when you’re working with us is you’re buying into a unit trust that owns the asset so you are actually a unit holder in the unit trust and the only thing in that unit trust is your property you are the owner of that’s why I mentioned you are the equity owner of that with up to eight individuals now it doesn’t have to be eight individuals we divide properties

(09:38) up into eight units but if you said by the way I think I’ll use this property a lot more than just the the time allotted which I’ll get to in a moment. I want to own half the property you totally can the the reality is you just buy four of the eight units and you get four times as much of the the usage and Equity ownership of that of that asset. From the booking side the booking’s quite quite simple for every eighth you get six weeks of time throughout the year, 42 days that’s not a fixed calendar

(10:09) you book your time in when you want to show up similar what you would do with any kind of short-term rental concept except it’s it’s your home. From there you show up enjoy the property leave we deal with the cleaning the complexities and everything behind that but also the larger complexities around a home we’re making sure that there’s people are paying attention to the repairs that need to be made that we’re setting a budget for the property to make sure that things are getting repaired in a in

(10:37) a financially sound way the tax the finance the compliance of that entity we do all of that we just pass that information to you, so our idea is that you actually have a better view of the performance of your home than you do on your own traditional primary residence, so buy book, Joy quite simple concept amongst this we can get into some of the calendar details when we go into Q&A’s but really what I want to focus on is you get six weeks a year per eighth if you think you’ll use it more you you can simply buy more of the property

(11:14) foreign thing that I highlight this we as a business are not buying these properties and turning around and selling them to the incoming buyers we actually operate as a Marketplace between the existing owners of a property and the incoming buyers or the prospective buyers for that property so if you own a holiday home today and you say by the way I know I only use this a couple months a year why do I own 100% of this thing similar to what I said about my property and uh in the states you can sell the portion that you think

(11:51) makes sense for you if you know you use it three months a year so you only use it a quarter of the time sell 75 percent of the property as the incoming owners you can say by the way I’m busy I have a lot going on with work I know I can only use this property a couple weeks a year anyway and you can buy an eighth of the property off of that existing owner and we as Kō are structuring all of that on behalf of the existing owners as well as the incoming buyers the point here is there’ll be a lot of documentation that

(12:21) we manage we structure like I said we are a financial product and we’re licensed to do so we do all of the essentially the heavy lifting on behalf of the existing and incoming owners you just have to make sure that you’re meeting the requirements that you need meet the criteria for our onboarding for purposes which we’ll discuss here in a bit and then from there it’s your property we’re just the service platform that’s managing it so you can enjoy it and we do the rest. Now I want to hit something really dead

(12:52) on because this will probably come up in a Q&A it didn’t didn’t show up already, but we are very, very different than the Alternatives that you have in this space whether you have an investment property that you do short-term rental rentals, on that you just so happen to use, whether you own a property outright you just keep the doors locked and no one ever shows up except when you’re there but you have to deal with the costs and the obvious one as well which is well what about time shares I really

(13:16) want to focus on the fact that we’re not a timeshare we’re actually not designed the way the timeshare operators are the reason for this is quite simple we are not the equity owners we’re not sitting there with a big building saying by the way for a certain amount of money you get usage rights and that’s your time allotted and here you have week number five in the calendar whatever else they describe it’s a complete other way around it’s your asset you use it as you see fit we just manage it on your behalf

(13:46) practically what that means is even more simply is that we can be fired if a group of owners wanted to show up and say by the way you’re not doing your job we’re going to relieve you of your duties or if Kō disappeared off the face of the Earth one day you still own your property that is a very very big difference between a traditional timeshare structure, we actually have an independent trustee that sits over each and every property, completely separate from us so in those strange, you know once in a million outlier cases they’re

(14:18) there on your behalf so they would help transition from either a sale if everyone decided to sell the property in or bring in a new manager whatever case that is they’re there operating on behalf of you that we’ve put there in your place to make sure that you have a fantastic ownership experience so we have the benefits we get some of the benefits of full ownership because you are the equity owner, you can buy a portion of a property fast forward a couple years if you see an upside in the market you think there’s opportunities

(14:47) to sell you can take advantage of that um you get the benefits of offsetting cash flows the way that you do with the short-term rental but when you add all this up there’s really nothing like us in the market where you get the benefits and you’re able to forego all of these consequences so I know this is a bit of a crash course I know we’re not getting particularly technical but if you only had 15 20 minutes to jump on the on the webinar I wanted just to highlight what we are from a customer’s perspectives and then

(15:18) always happy to have follow-on shops with each and every one of you of really what we do and how we can support so with that I’ll hand it back over to Rich and we can go in a bit more of the the details from there

(15:30) Rich Harvey (Propertybuyer) Right thanks Ryan we’ll just come back over to this one here so Ryan thanks for just giving the background to to the concept and how it’s working so I discover a couple of things just talking about again just reiterating what has been the traditional problem of luxury holiday Homes is obviously the big

(15:54) ticket price to get into the market and you’ve got significant Equity tied up in that particular one property you’re not really diversifying your investment base and obviously expensive maintenance and the traditional low level of usage and you know a lot of people only visit their holiday homes a couple of times a year if that so it’s a great concept so what are the the benefits and the costs of this concept well firstly the benefits are it’s fractionalized so it’s a lower entry price it’s divided into those

(16:22) eight units as you’ve described it’s pretty essentially it’s a user Pays models and it really reduces a lot of the maintenance costs it also means your Equity is not as concentrated in one particular asset you get to use the asset when you want to but you can then deploy that money into other other holiday homes or other types of Investments that you’ve gone might want to pursue I guess on the negative side you don’t have total control you have some control according to the shares that you own but you don’t have full

(16:52) control but it is managed by a reputable group and you do have limited booking times you get as Ryan said six weeks every 1/8 share and there’s a particular fair and Equitable sharing system of how that works so that’s just something to consider when buying or entering into this sort of relationship now some of the locations where we believe that this particular model is going to work really well is what we call the prime holiday destinations and I won’t go through all the list there but you can obviously see

(17:23) that the really sought after areas Gold Coast, Byron Bay, Mornington Peninsula, WA Margaret River, Hunter Valley, Central Coast, Etc they’re some of the really beautiful areas around Australia where we think the most premium and Prime holiday home destinations will be in most demand and we’re also seeing very, very significant Capital Growth and will see continue to see Capital Growth well into the future now I guess you’re on some, of the jump in, here if I miss anything but the buying process um do you want to take over this part Ryan and just keep a snapshot of buying and potentially selling process please

(18:00) Ryan Fritsch (Kō) Yep absolutely so from a buying perspective it’s largely aligned with what you’d expect with a normal a normal sale but there are some particularities to it that are happy to go over so we obviously have properties on our website we’ll list properties on kind of traditional real estate listing platforms as well if you see a property that you like it’s pretty simple either reaching out to the agent that we’re

(18:23) working with or reaching out to us directly we talk about that property the benefits of that property and then of course that the product that we are and what we provide let’s say someone finds a property they like, they like the concept and they want to proceed forward we are this is an important piece we’re a wholesale AFSL licensed business so what that means is we can only Market to mainly sell to accredited investors so happy to go the kind of nuances of an accredited investor criteria as well but

(18:53) in a nutshell you need to be making you know more than a quarter million dollars a year is one of the key points here there’s some subtle nuances that I circumvent all of that as well in terms of net worth but that doesn’t stop anyone from having the conversation you can see a property you’re interested we can then start to unpack you know what’s your net worth how much money do you make a year yes you actually meet the accredited investor criteria and then we can proceed with the actual onboarding side

(19:20) so another important thing is we are a financial product so we do have to onboard people in a very compliant way so not to get too kind of banker jargony for our Commonwealth Bank folks here but we do have to onboard people through a (KYC) or know your customer in anti-money laundering across portal that is completely digitalized so assuming you’re a relatively normal human being with no strange outliers you fill in the details of who you are your bank Account Details and everything else that gives you a green light and says great everything’s

(19:53) good if there was some strange scenarios let’s say you’re investing through a company and we might ask a couple more details about that company and it helps automate the process to be as simple as possible require an upfront deposit just to make sure that you are essentially legitimate and then would want to see some sort of proof of funds or what the process would be for you to secure those funds to make sure the purchase takes place now an important thing is this is where we switch and this is almost in a

(20:21) similar way kind of like how an off-plan development works you’re putting a deposit name to then make a purchase but from here there take a couple more steps that executes this sale itself so of course you’re going to have to put in the donating proceeds before the Property Transfers or before the property closes but the key thing here is you’re one of the buyers that’s coming into then by the asset so when you’re coming in and talking about the property we’re telling you where we are

(20:51) in terms of that sale so let’s say we have an owner that wants to sell half of the property and they’re happy to commence the sale once they get two buyers or two a quarter of the property out of the way if you’re that Second buyer that’s coming in that then strikes the the legal process in the home is yours quite quickly if you’re the first buyer we would let you know by the way your number one we require two um and then from there we will take a deposit and we would keep you in the loop as the sale process commences so it

(21:23) does take a couple steps because we’re pooling funds from the co-owners to then commence the real estate transaction which is obviously a little bit different than a traditional real estate sale it’s more like almost how development Works in a in a lot of ways from the sales side if you want to jump foreign open source Marketplace for owners just so so people know I get realistically two to three owners a day that reach out to me and say hey by the way I’m interested in fractionalizing my

(21:59) property and that’s fantastic and I want people to do that but ultimately we decide what properties we Market based on their location price points build quality if it needs a renovation and so on and so forth but let’s say we find a property either working you know essentially sourcing the property working with a property buyer and other other groups to find properties out in the market or an owner actually reaches out to us and says hey by the way I like the concept can we commence we would

(22:28) then do an initial DD process just to make sure like hey you know what that really means is I’m going to the property or someone from the team most often talking with the owner talking about their their intentions and then we would start marketing the property marketing the property doesn’t change anything legally so what we’re not doing and it goes back to my previous point on the buy side we’re not changing some legal structure from the moment we start working with someone and then selling units of a trust for a co-ownership

(22:56) model we are marketing the property to the outside world to see if we can pull the funds together for individuals to then become the co-owners once we meet that continuing of the existing owner is looking for and I say this because we’re working for the owner to make sure we get what they they’re looking for from the collection of funds from the incoming buyers that’s an important thing to know because as an owner assuming you have a property that meets our criterias we’re not doing anything

(23:29) legally there’s no risk for us to be able to Market your property and think oh no now all the legal or some weird legal change that’s not the case it’s merely a listing no different than almost a traditional real estate listing once we get to that point where we’ve achieved the you know the price of the number of units sold that the owner is looking for the property is then transferred into the unit trust that we are the managers of and the units of that trust are immediately sold now if you think back a

(24:00) slide we’ve already secured the funds for that trust so all that’s happening is we’re transferring the property into our trust those funds that are sitting in trust are then there for the units that are being sold and the existing owner gets the proceeds from that sale at that point we have a formal co-ownership structure and we have a property that’s in the ecosystem now you know that’s probably a bit technical it’s a little bit different than the average real estate kind of transaction behind this there’s about 150 pages of legal documentation that we did all the research to make sure this works so I apologize that this is a bit technical if you’re looking at this from the other side and you say this sounds like a lot there better be a lot of detail behind how this actually works we have that as well I tried to keep it as brief as possible but still give people a bit of confidence on how this process actually works

(24:56) Rich Harvey (Propertybuyer) thanks Ryan that’s great I’ll just pick up here on the types of property and what the features are that we’re looking for so just to explain to property buyers being appointed um exclusively by code to find the particular types of properties that fit their model so not every holiday home will fit the model we’re looking for really nice quality and luxury holiday homes typically from you know three or four million dollars up to around say 14, 15 million dollars is the ideal range so we want particularly freestanding luxury homes but they will look at apartments potentially if they have a really nice Penthouse Apartments

(25:30) with great views but ideally houses where you can consider maybe one or two families staying in the property at the same time and just creating a great family experience or a great holiday experience so extra bedrooms are certainly looked after extra Living Spaces are very much looked after certainly well-appointed features that’s sort of the key so in terms of the individual features something that’s unique something that really stands out that spell is the wow factor ideally it’s got a waterfront or a country Vista

(26:01) it’s got extensive entertaining areas you can imagine sitting around a fire pit or around the pool just relaxing having a great time that’s the sort of thing that we’re looking for in the co ecosystem certainly got to be high quality we don’t want properties that are going to be a nightmare to maintain and are going to be needed to be repainted every two years and ideally something that’s that’s TurnKey each of the properties ideally would have a set of furniture in if not they’ll need to be furnished so it’s

(26:32) just to move in and enjoy as a holiday home from day one so particularly pools and outdoor areas you know basketball court tennis court those sort of things are really great features that can add a lot of value to the whole holiday experience so you kind of get a bit of a picture if you do go onto the Kō platform after this webinar you can have a look at the set of properties that they’ve currently got we’re just going to do a little bit of a transition now so I’m going to invite Michael and and Anna to uh to jump in

(27:01) here and just give us a bit of a background on how potentially you can finance a fractional ownership of a holiday home so Michael and Anna I’ll hand over to you guys thanks

(27:12) Commonwealth Bank Thanks Rich so thank you Kō and Propertybuyer for this opportunity to present today so my name is Anna Schertz and I am a Premier Banking manager for the Commonwealth Bank I’ve been with CBA for 15 years half of that time in the leadership space here today I have Michael Kirk who has been a senior relationship manager

(27:35) for over five years so a wealth of experience in The Lending space given we have a very short time slot today of five minutes we’ll be presenting to you on what seems most relevant to the target audience so which will be basically around releasing Equity from your existing property so if we can just go to the next slide please rich so there’s always a disclaimer with the banks so before we kick off I do need to make aware that today’s session will cover only general information so you’ll need to determine if it is

(28:14) suitable for your individual situations so yeah I will now take it over to Michael to present sure thing hi everyone thanks Anna for the introduction it’s a pleasure to be here to present to you all today as Anna’s mentioned we’re primarily here to talk to you about how we can assist you with co-ownership and this is primarily going to be by utilizing equity in an existing property I’m sure everyone’s heard a phrase related to equity at some point whether it be utilizing available equity in a property

(28:45) or potentially by another Alias cash out and you may already have a very good understanding as to what Equity actually is but just to make sure we’re on the same page I’ll quickly cover the basics so from a bank point of view Equity is simply the difference between the market value of your property and the amount that you still owe on your home loan so there’s a couple important things to note around this is to be able to look at releasing Equity the banks actually need a security to lend against so

(29:14) primarily you need to own a property before we can even consider this option secondly another important thing to factor is that banks have LVR margins LVR is another term you may not have heard before and essentially stands for loan value ratio this is basically how much of the property value is leveraged as debt so the banks typically like to float around an LVR ratio of 80% however there are instances where we will entertain higher margins Richard we just jump to the next slide thank you so I just want to look at a

(29:51) couple of practical examples with your just to give you an idea as to how this would actually work if we look at the left side of the page you can see your lovely house there assuming the market value of this place is around a million dollars and let’s assume that you’ve got an existing debt of $500,000 on that place so if we look at it from a non-banking point your actual equity in the property would be $500,000 so 50% the bank owns half and you have half but if we then factor in the bank’s typical

(30:23) lending margins and say work around 80 that means the bank’s willing to leverage up to 80 of debt against that property so in this instance if your property is worth a million dollars the bank’s happy to say We’ll allow up to $800,000 of debt against that property so when we look at from a lending point of view we have to consider any addition any existing debt that’s already on the property so in this example if you’ve got 500 thousand dollars owing already and the bank’s willing to allow an 80%

(30:52) lend on your million dollar value that’s eight hundred thousand so the difference in that is three hundred thousand so essentially that’s what we would say you’re available equity in this position is now what we would then look at doing when we talk about releasing is we can essentially do a new facility so we do a new loan or we do a Top-Up facility where we basically extend the credit available on your existing loan and we give you that $300,000 which is essentially where the term cash out comes from we utilize the equity in the

(31:24) property to then release cash to you and then with that cash you’re able to go on the pursue alternate investment options at your own will now without going too much detail around the structure it’s important to note that when we do look at completing Equity releases we’re able to also pair offset accounts to these facilities which will offer a bit of flexibility and help reduce overall interest payable if we look at a more complex scenario on the right side of the page so say you’ve got an occupied residence and you’ve

(31:55) also got a couple investment properties and these are just your typical investment properties where you put a full-term tenant in there so the principles are exactly the same we look at what the values of the property are and we look at what the existing debt is so essentially if we assume the combined value of all these three properties is three million one hundred and sixty thousand we then need to just assume that the lending principles will be the same the bank wants to ideally take out an 80% lend at Max so if we assume that the collective

(32:28) debt that the bank would be willing to leverage against this against these properties is looking to be around $2,528,000. then if we look at the existing debt assuming you’ve got those three loans there $503, $592 and $499 that’s a total existing Collective debt balance of $1,594,000 that is currently leveraged against these properties again in the same same logic as the first example we look at the difference between what the bank’s acceptable security position so 80% of the combined

(33:01) value would be against the existing debt position so the difference between the 80% value and where your current debt position stands is around $934,000. so in this instance again we’d be looking to establish a new facility and essentially give you that $934,000 to then go and pursue alternate investment opportunities or participate in the Kō arrangement if we could just go to the next slide Rich sure thank you as Ryan mentioned earlier the capacity to which we’re going to be able to assist is going to vary dramatically

(33:40) depending on your own financial situation so if this is something you’d like to discuss further or you’ve got any further lending needs that I may be able to assist with I would love to hear from you my details are all on the screen at the moment and given we’re a bank that invests heavily on technology I’ve actually got a QR code there which you’re able to whether you’ve got the time now scan with your phone or when the presentation comes out later you can review it and scan it then and

(34:06) essentially if you just scan that quickly it’ll actually prompt you to say my details as a contact in your phone just so you can easily reach out to me but I’d just like to say thank you again for your time today I look forward to anyone who does happen to reach out and discussing things further and I’ll hand back to Rich and Ryan thank you

(34:21) Rich Harvey (Propertybuyer) All right thank you so much Michael and Anna appreciate those those insights and yeah as I said to you guys before offline I’ve just recently done a refi to to give some Equity to do exactly what you’re talking about there’s more investing opportunity so it’s a worthwhile strategy so look we’re going to open it up now for Q & A so in the bottom of the screen there there’s a Q & A box and if you know a couple people started typing their questions I’ve got a couple more questions for Ryan too also my details are there and if you are interested in considering buying a fraction of a holiday home then please reach out or if you’ve got a property

(34:59) you want to consider or the Kō platform please reach out to myself and be delighted to have a chat and go further with that so um Ryan I’ll just open it up now take it off the screen share we’ll just pull up the Q & A so the first question for you Ryan does the property get rented out when the owners aren’t using the home so let’s say I’m an owner I’ve got a 1/8 share but I only want to use my home for three weeks what can I do with the other three weeks?

(35:27) Ryan Fritsch (Kō) yeah so we’re deliberately vague online about this but there’s a reason for it it’s because every property is a bit different so this the answer changes so not to be vague but the the answer is it depends categorically yes we would rent out a property assuming that it is a property that let’s say there’s there’s no restrictions from a government or a regulatory perspective there’s no essentially Community restrictions on it or it’s in a property there is a situation where we look at the property

(35:59) and we say by the way just because of its price point location or whatever else this is the beautiful home but we just don’t see it creating enough upside to justify the complexities in the short term Budget rentals so with that saying most of the time yes there is that opportunity however there will be properties and will be very explicit about this for those properties saying by the way this property would not be able to be short-term rented so just be aware of that that you won’t have that ability to

(36:27) do the cash outflow to offset cash outflows now with that being said the way that we’re designed and what I get a lot of questions about this we are usage focused so it is about being able to give people access to these high-end homes while it is possible to offset cash flows even make a yield with some properties that is not what we focus on we will never Market a property and say by the way you’re going to make this percentage of yield if you rent out all of your your weeks or anything like that that is not

(36:58) what we’re designed to do it’s a usage first and then the financial cash out or cash flows being an interesting second if there is that opportunity there it’s still your real estate asset of course you can sell the property down the road make appreciation if there there’s that opportunity but that short-term cash flow piece is not our key value proposition the other side of this though just a it’s a bit of a segway but I didn’t mention this earlier if you’re not going to use the property

(37:27) all of the time we have a partnership with a company called THIRDHOME so THIRDHOME is is a luxury holiday home Marketplace through exchange time so let’s say you take a week of your six weeks you put it in the in THIRDHOMEs ecosystem from there you can then stay a week in France for example or on California or whatever whatever it is you want to go because they have 15,000 properties around the world all owned by luxury holiday homeowners such as yourself

Rich Harvey (Propertybuyer) okay so I think the answer is simply it’s flexible it depends on the property
(38:01) the goal is not a yield play it’s more a holiday own ownership and usage play rather than getting cash flow another question in segment are you listed on the title of the property as in tenants in common so you’re not understanding is not simply on the unit trust deed

(38:16) Ryan Fritsch (Kō) so part of what we believe besides the the research that we’ve done around tax Effectiveness and operating Effectiveness onboarding and off-boarding individuals part of our concept is privacy so we want people to not have to deal with the complexities of

(38:31) being on a deed or even co-owners knowing each other each co-owner is completely private from the other co-owners as if it’s your own home so the answer is no you are not on the title

(38:42) Rich Harvey (Propertybuyer) okay and do you have any properties coming up in WA soon?

Ryan Fritsch (Kō) that is on our roadmap yes so we have focused on the east coast in the short term but we will be looking and we’ve had some articles about this we’re not just in Australia so we have we’re looking of course to the West Coast but we’re also looking to expand

(39:01) over in New Zealand in the near future we have properties in Indonesia in Japan and we’ll also be launching Thailand here quite soon

Rich Harvey (Propertybuyer) to answer that question yes we do have two or three properties in some beautiful parts of WA we’re currently just talking to a couple owners about how that might work so watch this space is the answer for the next two months another question from Peter Hughes is any part of the purchase of the property by the trust funded by debt?

(39:27) Ryan Fritsch (Kō) no so the the way that it’s structured right now is if you have a debt structure similar to what Anna and Michael just mentioned that sits with you and your existing collateral out outside of this there is no debt that we as a business nor could we even put debt on it because we’re not an equity owner or any of the existing co-owners have currently we are in the process my apologies that we are not presenting that today we are in the process of offering a debt opportunity through a non-bank lender to provide leverage on the units of the trust there’s a key Point here and CBA touched

(40:05) on this um that has to be completely isolated and not impact any of the other co-owners in the instance of a delinquency in default so we’ve been quite strict to make sure that in our discussions when we structure that if you’re one of the other owners there’s no way shape or form you could be impacted which is obviously quite complicated from the financial products person so no there’s no debt on the on the trust when that becomes an option that you can provide leverage directly on your units still as the other co-owners you’ll not be impacted by that in any way shape or form

Rich Harvey (Propertybuyer) so I guess that’s a similar question I’ll just throw in one of my own questions Ryan is if if someone does run into financial trouble and they have to sell their assets or they get divorced what you’re telling me is that they the other unit holders will not be impacted adversely by The Fortunes of one of the other current existing unit holders

Ryan Fritsch (Kō) exactly so in our documentation that’s quite lengthy it describes essentially what happens in (41:05) situations of divorces deaths if someone stops paying their bills and what’s the the process is involved with that if we have to with us in a in a nutshell if we have to actually sell on behalf of the other owners to protect the other seven if someone just stopped paying all their bills we have the power to do that with the support of the independent Trustee of that property

Rich Harvey (Propertybuyer) okay great another question why is it divided by eight and not ten because 10 might get more people or make the fraction even even lower?

(41:38) Ryan Fritsch (Kō) yeah so you know what the the research and this is a big kind of Global Research piece most people use their properties like I said less than less than 20% of the time so it comes out to you know five or six weeks a year if we went so I’ll start with the other end of the spectrum going into a quarter of the property for most properties just doesn’t make a lot of sense because most people won’t use them that often if we go down to twelfths operationally that is actually quite complicated because you’re dealing with

(42:05) 12 individuals rather than eight so we’ve built everything around that idea that people are using their properties five to six weeks a year as a global average obviously every country and every region is a bit different the other side of this as well as the essentially the standard with co-ownership models around the world right now is going down into eighth so rather than try to confuse people if they look at Pacaso or anyone else we followed this thing the same Trend Rich Harvey (Propertybuyer) right okay I guess another question which is

(42:36) similar to this next question about so there’s no cash flow directly from the property and what are the average expenses per year tell us about how the property is managed and how those expenses are shared across the ownership

(42:47) Ryan Fritsch (Kō) yeah that’s a that’s a good way to describe it so obviously with every property you have things such as utilities you have the if there’s a pool being cleaned the long Beam mode all of that you have those those expenses the benefit that you have in this instance is that they’re divided into eights or

(43:03) whatever the the ownership actually sits so let’s say just simple math it was a thousand dollars a month to maintain a property then you’re only paying 125 dollars because that’s your respective portion the other side of this though is that the property is fully managed so this obviously is it for free cleanings and things like that of the of that nature are still your responsibility so if you go for a week enjoy your property and leave cleaning company comes in cleans that property that’s a fee that you’re responsible for

(43:34) we don’t divide that up into even eights because someone might use the property four days at a time and someone else uses it for two weeks at a time and that wouldn’t be very Equitable to charge someone who uses the property more frequently to get a smaller bill so you of course have you know taxes general maintenance we do put a reserve fund aside as well so if there are any break or the roof needs to get replaced or anything like that restructure that into a full operating budget that the owners get

(44:04) visibility on for the year and they’re responsible for their respective eighth if there was a short-term rental component we would use that to offset the cash flows as well Rich Harvey (Propertybuyer) Right now tough question Christmas everybody wants the Christmas week how do you decide who gets Christmas in Easter Ryan Fritsch (Kō) yep so a couple things I’ll actually skip half that one first but I’ll talk about Peak Seasons more broadly so peak season we cut into your respective shared so let’s say Peak for wherever property is is roughly 16

(44:39) weeks if you own an eighth of the property you get two weeks worth of that peak season so yes you have six weeks but you can’t use all six weeks in that Peak period unless there was extra availability that just didn’t get used now the outlier of all of this of course is something like Christmas a key Point here if you book that Christmas week you are disqualified from using it the next year you just simply can’t you can’t use it we’ve taken that approach rather than allocating essentially a Christmas

(45:11) year every eight years um just because that seems a little bit too remote product but taking the other end of the spectrum and saying yep first come first serve for Christmas just seemed a little bit too loose Rich Harvey (Propertybuyer) right now if you want to sell your share like you’ve owned it for a couple of years and your life circumstances change you just you know wanting to sell it does that get offered to the other stakeholders first other shareholders first or not Ryan Fritsch (Kō) yeah yep so the the way that it works is the existing co-owners

(45:40) of that property so not all the Kō co-owners but just the corners of that property they get first right of refusal so you would let us know hey it’s been three years I love the property but I want to go buy something else so I’m going to sell this that’s totally up to you we can help you with the price and everything else to bring it to Market but once we determine yes you want to sell at this price we then offer that to the existing owners first globally that’s actually the first

(46:08) people to pick those up on average so if I own an eight can I see another eight that comes on the market I fall in love with the property yeah I’ll grab that and grab a have a quarter of the property now but let’s say none of the owners buy it then if you have someone in mind that already wanted to buy the property that that’s great congratulations we don’t have to to support so we don’t have to take over the transaction we just onboard that client but if you say hey I just want to sell it what we would do is

(46:34) then list it we’d work with local real estate agents to then sell it quite similarly to a normal property Rich Harvey (Propertybuyer) right okay and how much power does Kō have to make maintenance and painting decisions can Kō go in there and paint the garage door pink and balustrades blue and decide what’s what or do they do you have to consult with the owner’s group first Ryan Fritsch (Kō) yeah so that there’s uh obviously a bit of a balance here where we want to make the property as stress-free as possible so let’s say a window gets broken we

(47:04) and no one was to blame something broke the window we’re going to get that repaired obviously that comes out of a reserve fund but we’re not going to ask for permission to repair window anything that changes from a design perspective yes that involves the owners so let’s say we’re going to do completely repaint the house or it’s time for new furniture or anything like that we would essentially get quotes get concepts pass those to the owners and then similar to almost like a strata

(47:30) process we set a motion and then go from there so we’re not trying to make the decisions on the look and feel of the home we just want to make sure when you get there it feels like home Rich Harvey (Propertybuyer) now if someone wants to buy more than a 1/8 share how many eight shares can you buy Ryan Fritsch (Kō) up to four so we want to make sure that no one essentially can force everyone else into decisions going to that voting process that we just described um so yeah you can buy up to half of the property with four units and then of course a very common

(48:02) question that I get asked is um well can I go buy units and other properties the answer is of course if you want to buy four eight across four different properties congratulations you have four holiday homes Rich Harvey (Propertybuyer) right excellent and also another question what is Kō Homes making out of this particular Venture Ryan Fritsch (Kō) yeah so you know the benefit for us is as we scale our properties these co-ownership properties are ours that we that we manage and like I mentioned theoretically we could get relieved of our duties but as long as we’re doing a

(48:33) good job we’re the managers of these properties so we do charge a platform fee per month per owner doesn’t matter if you own an eighth or a half of a property just a flat fee every month we don’t charge anything for the operating expenses so going to my point of having the full budget for the property we don’t charge any premiums on that so the light bill is the light bill the you know the landscaping you’re just paying your respective portion so we charge a fee to

(49:03) structure everything initially for the fractionalization of a property into the co-ownership model we then charge a platform fee per month and then if you resell we would charge similar to an agent commission to help support that as well Rich Harvey (Propertybuyer) right okay someone’s Keen who’s the best person you got in contact with we’ll be sending around a copy the slides but please just get in touch with myself and I’ll make all the introductions and whether you’re looking to buy a fraction or to sell your property through the

(49:33) fractional program I can help you facilitate that as well Ryan just to kind of give people more confidence I guess how much due diligence is done on the property before you put it on the platform I mean is it just a matter of you know oh that looks nice a pretty picture and you put it up what goes into the background Ryan Fritsch (Kō) yeah then this is a key point where it’s you know we’re not an Open Marketplace where someone can go and load pictures of their property and try to sell stuff

(50:00) there’s some platforms out there that essentially offer that it’s just a big yeah big open source Marketplace and you can buy and sell stuff that’s not what we will ever do you know the sales process for the property is really where our job begins we have to think about the fact that we will manage this property probably for forever unless someone essentially writes a big check and buys the property outright from all of the owners and all the owners don’t want to be involved anymore while individual owners may come

(50:31) and go it will stay our property in perpetuity so with that being said we have to make sure initially it is a property that meets our expectations it’s part of the brief essentially that we do with Propertybuyer to make sure that everyone on the ground is looking for the things that we’re looking for on top of this we go and look at the properties ourselves to make sure that the own the property is sound that the owner expectations are aligned with ours long before we ever even Market the property so before it’s

(51:01) ever even shown the layer beyond that is this is still a traditional real estate transaction we’re going to do title searches we’re going to do all of those things to make sure legally we can even do this before the transaction takes place so quite a bit of a robust inspection beforehand and then there’s the added layer of a complete DD process to make sure that there’s no title discrepancies you know five years from now because if someone dropped the ball Rich Harvey (Propertybuyer) yeah now I can tell you I mean I can

(51:29) tell you behind the scenes I’ve been looking at all the properties I vet them first before they go to Ryan’s inbox and my team is very very thorough in what we look at we’ve rejected quite a few we’ve also accepted quite a few and we’ll continue that run that process so it is just like when you expect a service of a buyer’s Advocate we want to make sure the buyers are fully protected and get exactly what they’re after in that process so that’s what we’re after Ryan updates will run out of

(51:56) questions there um but unless you’ve got anything else to add I think we might wrap it up anything else you wanted to finish with Ryan Fritsch (Kō) no I just want to say thanks everyone for the time you know we’re quite excited about bringing this to the market and we see this particularly in Australia as being a real value ad given the prices of property here as they keep despite wild fluctuations the reality is there’s no more land getting added to Continental Australia so we see ourselves as being a genuine high

(52:27) quality opportunity for people not just looking to invest but to have something for their family and friends for the future so appreciate the time if you have any questions feel free to reach out and like Rich mentioned this the video details and the slides will go out here after the after the call

Rich Harvey (Propertybuyer) right fantastic and look I’ll just finish by saying thank you Michael and Anna also for joining us to talk about the financing side of things through an equity release um a clever smart strategy to to

(52:54) actually access a holiday home at a 1/8 of the cost I look when I first looked at this process it did take me a couple of hours days weeks to get it across it but as I’ve got into it more and more I’m very much more in favor of it and I’ve got a very economic analytical brain and both from an emotional and an economic point I can tell you it does stack up so if you do have any interest please reach out and we’d love to engage with you further in the future but I’ll say thanks for now we’ll close off and I

(53:22) hope you enjoy the rest of your day bye for now much thank you.

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