Fractional Ownership
In a nutshell, the concept of fractional (shared) ownership is
to divide the purchase cost and maintenance of a property into segments which
match the amount of time an owner desires each year at the home.
Maintenance and schedule coordination are provided by a
management company.
Owning your own vacation home has never been easier!
Benefits of Fractional Ownership:
Pay only for what you use.
Instead of paying $2M for a home used occasionally, you can buy ownership shares
for the amount of vacation time you want. Purchase 10% (5 weeks per year) or 20%
(10 weeks) in a deeded fee simple share.
Expenses are shared amongst owners
(taxes, insurance, utilities, etc).
1. What are
fractionals and are they the same thing as private residence clubs?
Fractional ownership of condos and vacation homes, also called private
residence clubs, allows you to enjoy up to three months of home ownership
privileges at a top-of-the-line, luxury resort but at a fraction of the cost of
whole ownership.
2. Who are
fractionals really for?
This type of real estate arrangement is ideal if you want the benefits
of owning an impressive second home located in a very exclusive community but
can't justify the investment because of limited use.
3. How long is a
typical fractional share?
Traditionally, each property is divided between four (most common) or eight
owners. The calendar year is divided between the owners and rotated
accordingly.
Because there are far fewer owners of each
individual property than say your typical timeshare, you'll have a lot more
options regarding when you can use the home.
4. Where are some
of the services I might expect from a fractional ownership or private residence
club?
You will receive the same services individual owners receive at the
resort/development for you wish to purchase.
5. Where are
fractionals located?
Fractionals or residence clubs have sprung up in exclusive, world-class resort
destinations
worldwide. St. Thomas, Virgin Islands, Puerto Vallarta, Mexico are popular
locations. In the U.S., the first fractionals were in major ski areas out west,
particularly Colorado. Eventually they spread to northeastern ski areas.
Since then fractionals have begun appearing in
golf-oriented communities like Hilton Head Island, South Carolina and popular
beach states like Florida.
6. Who manages the
fractionals?
Every resort is managed by a professional property management company.
7. How do
fractionals differ from time shares?
Fractionals are far more exclusive and include many more luxury
amenities and services than timeshares. They tend to be larger homes, usually
two to five bedrooms. Timeshares are typically for one to two weeks per year.
Fractionals typically offer 6 - 12 weeks, depending on the number of owners.
Financing a fractional with a bank or mortgage
company loan is easier than financing a timeshare. That's because timeshares
are looked upon as assets that depreciate while fractionals are considered
appreciating assets. Most lenders treat the purchase of fractionals like they
would wholly-owned second homes. However, in Mexico, typically most
transactions are consummated via cash or seller financing. This could vary
per transaction.
Finally, there are a limited number of
fractionals on the market, unlike timeshares which are more common. Most likely
the quantity of fractionals will stay small because of the emphasis placed on
building in only the very best, most highly desirable locations. The result is
that demand outpaces supply, resulting in appreciation and good resale
potential, neither of which timeshares can offer.
8. How do
fractionals differ from condo hotels?
Both offer luxurious accommodations and services for the person seeking
a vacation home. The condo hotel, however tends to be an individual room or
suite located within a major hotel. Fractionals can be condos, townhouses, or
single-family homes located in an exclusive community.
9. Why should I
buy a fractional instead of a wholly-owned second home?
Most people who buy a fractional recognize that they won't be spending more than
a couple of months a year at their vacation home. With a fractional you can get
the quality and level of luxury you want and only pay for the "fraction" of time
you actually plan to use the home. And you never have to be concerned with
finding renters for the months you're not there.
Also, keep in mind that included in the sale
price and annual fees of a fractional is all your maintenance, upkeep and
housekeeping. Fractionals are 100% hassle free!
10. Can you trade
or rent out your time?
In most cases, yes, but you'll, of course, want to check the specific
guidelines for the property you're considering. Most fractionals also
participate in a reciprocal usage program similar to timeshares in which you can
trade weeks and locations.
11. Can more than
one individual or family own a residence interest?
At most properties, the answer is yes. In addition, the extended
family of the owner including children, grandchildren, siblings and parents can
use the residence and are entitled to the membership privileges.
Articles and press about fractional home ownership.
Fractional Ownership
