Adam Capes is one of the few people who have had years of experience creating and launching fractionals, destination clubs, and luxury residence funds. He knows the challenges and solutions inherent in working in this industry. Last year, Adam launched a new company called My 5 Homes. We recently interviewed him to discuss lessons learned along the way and how these are applied to his new endeavor:
My 5 Homes And The New Homeset Concept
SherpaReport: When was My 5 Homes launched, and how did you conceive this idea, as well as the unique idea of home sets?
Adam: My 5 Homes was launched in the Fall of 2021. An Owner Member in Equity Estates Fund One, approached me with an innovative business model that has been extremely successful in Europe over the past decade and it didn't exist in North America. A Danish company called 21-5 created it and it's elegantly simple - 21 individuals or families share ownership and use of 5 luxury vacation homes in destinations they love. They call that group of 5 homes and 21 owners an "association." Since that word means something different in the U.S., we created the term "homeset."
Three Primary Challenges In The Shared Residence Field
SherpaReport: You have been in the fractional shared ownership field for a while, what challenges have you seen over time that still need solutions?
Adam: There are three primary challenges that I've heard about from many members of destination clubs and fractionals:
1. Availability - I've spoken with hundreds of members of different destination clubs and fractionals over the years, and they all report that they love the homes and diversity of
However, I've heard over and over again the frustration of not being able to go where they want, when they want. Many members expressed disappointment that they invested six figures or several hundred thousand dollars in many cases and if they wanted to go somewhere over New Year's week, for example, when the family could all go, they might get the place they want every 5 or 10 years (or maybe never). Maybe they get their 4th choice, which they aren't really excited about.
Or these days, people are realizing they can work from anywhere, so they may want to go somewhere for a month or two, and that's virtually impossible in most destination clubs and fractionals, especially during peak season or even when it's decent weather in the destination. This is an issue because the member to property ratio is typically 7 to 1, 8 to 1 or higher.
My 5 Homes solves for this by having an owner to property ratio of roughly 4:1 and every owner having a Primary Vacation Home (only 4 per home) where they can store personal
belongings and have first access to the calendar each year, guaranteeing them their favorite holiday week or month.
2. Transparency and Self-Governance - I've also heard from a lot of members that they weren't happy with the communication (or lack thereof) from the management company.
Owners and Members want, and we believe deserve, full access to all purchase and sale agreements, company financials and management contracts. They also want to make the big decisions for themselves, like what companies to have reciprocity with and what a wind-down looks like. In short, they want some say and self-governance, as the management company's interests aren't always aligned with theirs.
My 5 Homes gives them that self-governance, including the ability to terminate their management contract with My 5 Homes if we aren't doing a great job, and a virtual data room where they can see all financial documents and agreements 24/7/365.
3. Getting Out (Liquidity) - The last issue that I've heard a lot of complaints about is the ability (or, again, lack thereof) to easily sell your interest in a destination club or fractional if you want or need to make an exit. I've heard of waiting lists to get out with hundreds (even thousands) of people on them and it taking many, many years to get out, if ever. This is often because the management company's interests aren't aligned with the owners or members here - the management company typically has nothing to gain in a resale vs. selling a new interest.
At My 5 Homes, we address this with our Exit Guarantee. It states that anytime after the first year, an owner can let us know they'd like to sell their interest and set their price. We will put them in touch with the first person on the waiting list to get into the homeset - which we expect to have based on the number of people that will have vacationed in each home either as a renter or with an Owner - coupled with the fact that an existing homeset of 5 homes with a rental history is expected to be more in demand than a new one being built. And My 5 Homes will take the exact same fee for the resale as for a new sale, so we aren't incentivized NOT to make resales.
SherpaReport: With My 5 Homes, what are your main competitive differentiators — three things that set you apart from other co-ownership companies?
Adam: As noted, our low Owner to property ratio and having a Primary Vacation Home gives our Owners the ability to go to their favorite destinations during their favorite times every
year, including for a month or two at a time. We haven't seen any other companies in North America that can offer that.
In addition, most companies charge Annual Dues (some as much as $1,000 per night or more) that you MUST pay every single year, regardless of how many nights you're able to actually use the properties. With 12 weeks of annual usage, we recognize that My 5 Homes Owners are unlikely to use anywhere near those 84 nights per year.
So, just as a typical second home owner will rent out their home when they aren't using it, My 5 Homes will do the same. All unused nights are automatically placed in a rental pool with the
proceeds going to offset annual shared costs. This means that owners could potentially use 2, 3 or even 4 weeks per year and pay nothing. Even if they used all 84 nights in a year,
we anticipate their nightly costs will be under $180 for our homesets with $1.4m homes and under $350 for our homesets with $2.8m homes.
Lessons Learned, Post-Covid
SherpaReport: In your experience, what lessons have you learned in dealing with the post-COVID public when they are pondering vacation possibilities? What lessons have you learned as regards avoiding errors that others have made in settings up your business model?
Adam: I think COVID taught people that, depending on their industry, they can work from home, which means that they can work from anywhere. I also think they place an even greater value on privacy and safety of staying in a home versus a crowded hotel when they go on vacation.
I have learned lots of lessons in my experience about what errors to avoid in setting up a business model. I think lessons comes down to transparency, self-governance, much greater availability and the ability to offset your annual costs with rental proceeds. I also think it's about making owning and enjoying vacation homes easier. My 5 Homes is focused on taking the complexity out of the business model, keeping things simple and easy to understand, and also just easy to go where you want when you want.
The Future Of My 5 Homes
SherpaReport: Finally, how do you see My 5 Homes growing within the next few years? Will there be more boomers? Gen X or Z groups? More multi-generationals? Right now, what is the demographic most interested in My 5 homes?
Adam: Yes, I think the demographic cuts through Boomers, Gen X and even Millennials. I think Gen Z is too young, but we're seeing 35 to 75 year-olds. Most are in their 50's and 60's. It's a similar market to those purchasing $1m+ second homes.