Equity vs. non-equity club memberships: What you need to know
Jason Becker, PGA
February 13, 2019
See the full article on golfadvisor.com
On a sunny day in March 2015, Paul and Laura Simmons sat at our conference room table looking completely distraught with sadness in their eyes. They had made a mistake. They worked their entire lives for this next chapter and didn’t know what questions to ask when shopping golf communities and real estate in Florida. From a small town in upstate New York, Paul a retired factory worker and Laura a soon-to-be retired school teacher, they had little knowledge of the private club industry.
Their friends would say, “You’ll love my club, no need to look anywhere else.” However, the Simmons’ wanted more concrete information, plus golf was extremely important to them. Playing five to six days a week was a must. Mens and ladies leagues, club championships and couples events were all on their “to-do list” as they searched for the perfect club. They were also in search of a home which complicated matters on who to trust for accurate information. They trusted their real estate agent, whom they just met, and it led to a major mistake. One they are still paying for today.
What happened? Paul and Laura found a home they both fell in love with. They eagerly asked questions to the real estate agent about the golf operation and were given inaccurate information about the common practices of the club. In a nutshell, they purchased a home in a “bundled community” where every door had a membership included. Put into perspective, if there are 800 doors, that means potentially 1,600 members (husband and wife). On an 18-hole golf course with 1,600 members, it was impossible for Paul and Laura to play more than two to three days a week because of the volume of play. They dreamed of playing golf every day and were now stuck with a $500,000 home in a club that wasn’t right for them.
By no means am I casting a negative light on bundled communities. At Golf Life Navigators we connect buyers to bundled communities often. The difference is the Simmons’ were only focused on golf. They didn’t have interest in tennis, pool usage, fitness, etc. They wanted to play golf often and should have joined a club with a focus on golf operations with a limited number of memberships. For buyers wanting to enjoy an array of activities and have their membership included in the home purchase, a “bundled community” is a fantastic option and one we would recommend.
The moral of this story is you as the consumer need to conduct your own due diligence and ask the right questions to the right people. The Simmons’ should have met with the membership director and asked specific questions about the golf operation, but they relied on their real estate agent.
To learn from the Simmons’ dilemma and keeping with our educational theme for Golf Advisor Living, I am pleased to have Danita Osborn join me to share the Top Five questions to ask a membership director before investing in a club.
Danita is the president of the Membership Directors Association of Southwest Florida. She is also the membership director at Shadow Wood Country Club, a 54-hole facility priding itself on golf, lifestyle and great people. Danita recently sat down with me and detailed these five important questions to ask a club while considering a membership.
We would however like readers to know one important item. There isn’t necessarily a right or wrong answer to any of these questions. Since purchasing a golf membership is such a personal decision, the answers to the questions below will help you make the most informed decision based on what is most important to you.
Danita Osborn’s five questions to ask:
1. What is the structure of the club?
There are several factors to consider here. Each has pros and cons you should weigh. As mentioned above, “bundled vs. non-bundled” is probably the most important structure to consider. The answer to this will also help you understand the current and maximum size of the membership, which you should be aware of, especially if playing golf several days per week is important to you.
Beyond that, you should learn whether the members own the club or is it owned by a developer or company. Is there a management company involved or is it run by a board of directors comprised of and voted on by the members? An example of a difference between the two scenarios is that in a “member-owned and managed club” you will likely have more input in the club’s future, particularly in terms of renovations, projects and corresponding assessments. In a “developer-owned and managed club,” the decisions are typically made by, and therefore also subsidized by, the developer.
2. What has the club done in the last few years and what is it considering doing in terms of renovations and enhancements?
You want to know you are investing in a club that is willing to reinvest. The club landscape is constantly evolving. You will want to make sure you are joining a club committed to keeping up with the club trends and desires of both existing as well as new members to ensure it remains competitive and sustainable long into the future.
Of course, renovations and enhancements come with a price tag. You should ask about the history of assessments (if any) and how the club intends on paying for future projects. Whether it be through member assessments, capital reserves, developer/owner funds, etc.
3. How will I get involved and meet people?
Once you have ironed out the more quantitative details, it is as important, if not more so, to be sure you’ve found a club that is a good fit for you personally. In my experience, every club has a unique personality and culture. You can line up amenities side-by-side to compare, but you also need to be sure the club members match up to your own lifestyle and interests. First, inquire about the demographics of the club. What is the average age? If you’re looking at a retirement/destination club in Florida for example, do most of the members come from the Northeast, Midwest, etc.?
Every club you are considering is likely to have a fantastic golf course, but how do new members get involved and find groups to play with? The members at your new club will make or break your experience so you need to know you’ll find people with similar interests and also you’ll be able to easily integrate yourself with those people to form genuine bonds and lasting friendships.
Be sure to ask if you can experience the club with another member. The membership director can tell you all the best things about the club but playing a round of golf with another member will give you a much stronger feeling as to whether or not you can picture yourself as part of that environment.