A co-ownership company selling shares in luxury homes announced this week that it was doing something new: it will let the owners of some of its homes rent out their shares.
Ember is a co-ownership platform that sells one-eighth shares of vacation homes, giving buyers six weeks in luxury homes in vacation markets across the West. This week it unveiled Ember Flex, homes whose eight owners can rent out part or all of their shares if they want.
The move is a distinct shift in the luxury home co-ownership space, where companies have typically prevented owners from renting their share in the home.
But Ember co-founder Jeff Lyman said the No. 1 question the company got from prospective buyers was whether they could rent out any portion of their ownership in the home.
“We saw this opportunity where folks wanted to have some flexibility in their time,” Lyman said. “With that flexibility can come the opportunity to offset the carrying cost.”
The change applies to some new homes sold on Ember, and only in markets where state or local laws don’t prevent short-term rentals.
Ember owners are entitled to six weeks of time in a home and share the maintenance, management and operating costs with seven other owners.
Many of the homes it sells, in places like Los Angeles, San Diego, the Oregon Coast and southern Utah, have restrictions on short-term rentals. In markets that don’t, Ember will offer Flex listings that make it clear that owners can rent out their shares.
Co-ownership companies — including Ember — have also historically touted the fact that homes would only be used by fellow owners who have vested interests in the home’s care as a selling point.
“We created Ember for owners to be able to enjoy with their friends and their family, and to create an ownership mindset for whoever is staying in the home,” Ember co-owner James Sukhan said in a video from February. “Renting it out in traditional nightly rental sites is prohibited.”
Pacaso, another leader in the co-ownership space, continues to prohibit owners from operating short-term rentals, a representative confirmed this week.
For Ember, Lyman said the move changes the calculus for prospective buyers looking at the cost of owning a share in the home.
“You can say how much would I need to rent this for it to start materially offsetting its operating cost, if not turn a profit?” he said. “At the same time [they’re] holding real estate that over any amount of time that’s meaningful will appreciate.”
To make it fair for owners choosing dates, Ember uses a “snake draft” system. One by one, the eight owners choose one of their six weeks for the year. The eighth owner chooses two weeks and the order repeats until every week is allocated.
To help owners choose dates that might let them maximize their rental earnings, an algorithm suggests best available dates for the given market. The algorithm pulls from data around short-term rental earnings from sources like AirDNA.
“If you don’t want to put any effort into figuring out the best possible weeks, you will get the best possible week,” Lyman said.
The company will conduct the draft well in advance so any potential rental listings can be advertised on short-term rental platforms like Airbnb, Vrbo or Ember’s own property management subsidiary.
Ember’s theory is that having rental price history will eventually help owners when they decide to sell their share.
“Better rates will increase its overall value,” Lyman said. “When they decide they want to sell their overall share, they actually can point to a healthy rental history.”
Lyman says Ember Flex is a theory that there’s a market for vacation co-owners who want flexibility and the ability to make money through rentals.
Launching the new offering to test that is a “huge, huge, huge part of the thesis,” Lyman said.
“We just thought there’s gotta be a hybrid model where people are going to want to use it themselves and want the flexibility to ramp that up and down based on their budget and their flexibility,” he said. “We’re totally bullish on this.”