How is the rental income shared between the owners with co-ownership?
The rental income redistribution system created aims to distribute rental income as equitably as possible between the co-owners (different companies can have different systems, please contact us first to confirm). This is the most widely system used by co-ownership companies and their rental application algorythm.
Assessment of rental income
The gross income generated is reduced by the co-ownership company management fees (10%), the rental platform fees like Airbnb (around 15%) and the cost of rental services (cleaning and laundry), before being allocated to the co-owners.
Example: the gross rental income from short-term rentals of your shared second home totals €10,000.
Gross rental income – Global: €10,000
– 10% co-ownership company rental management fees: – €1,000
– 15% rental platform fees (AirBandB type): – €1,500
– Cleaning and laundry charges (*estimate): -500€*
Net rental income – Global: €7,000
Distribution and payment of rental income
The distribution of rental income varies based on the type of season basically it is either high season or mid with low season calculations.
- A co-owner can choose to use his quota (7 days per share) to stay in the property, or to let it out to generate direct rental income.
- If he chooses to let his property, the rental income generated will be paid to him directly at the end of the rental.
Mid and Low Seasons
- Revenues from nights rented in the Mid Season are stored in a “Mid Season” kitty
- Income from nights rented in Low Season is stored in a “Low Season” kitty
- The income from these kitties is then redistributed in proportion to the number of nights not used by each co-owner to stay in their property over the season in question (Medium or Low). To simplify, the fewer nights you use to stay in your property in a season, the higher your rental income in that season will be.
- This rental income distribution (mid and low seasons) takes place at the end of the calendar year.
Case study for the rental income distribution with co-ownership
The co-ownership property is owned by 3 co-owners A (2 shares), B (3 shares), and C (3 shares). We shall look at co-owner A for this case study. At the end of 2022, the situation is as follows:
- Owner A has chosen to let 7 nights out of 14 of his personal use quota (remember he has 2 parts so 14 nights in high season), the net rental income generated by these 7 rented days is €5,000.
- Owners B and C have consumed all their quota of nights in the high season (42 nights as they have 6 parts. 6×7 nights).
- The Mid Season rental income kitty is €10,000
- In total, 30 nights out of 64 were not consumed by all the co-owners
- Owner A has not used his home for personal use for 10 nights/16 of his personal use quota
- Owner A will therefore receive 10/30 = 33% of this mid-season kitty, i.e. €3,333
- The low-season rental income kitty amounts to €15,000
- In total, 72 nights/232 were not consumed by all the co-owners
- Owner A has not consumed 28 nights/58 of his personal use quota
- Owner A will therefore receive 28/72 = 39% of this low-season kitty, i.e. €5,850
At the end of 2022, between high, mid and low seasons, owner A will therefore have received €5,000 + €3,333 + €5,850 = €14,183