Fractional ownership of vacation homes is a relatively new concept that allows you to enjoy four to 12 weeks of home ownership privileges per year in your favorite destination but at a fraction of the cost of whole ownership. This new breed of vacation home ownership is becoming increasingly popular as individuals and families look to maximize their family vacation time.
Fractional Ownership provides you with unparalleled benefits of owning a vacation home, but without the burden and cost of repairs and upkeep. Fractional Ownership is the centerpiece of a leisure lifestyle portfolio. It is an asset and part of one's estate, when purchased as deeded real estate, and while timeshare is also mostly sold as such, the two products are used very differently.
Uses
The second home Fractional buyer has a close relationship with their home's location. They return to that location periodically throughout the year for anywhere from three or four weeks to as many as twelve or thirteen, or maybe a month at a time. It serves not only as a vacation destination, but also as an escape weekend, a mid week hideaway, a gift to a friend or relative, a location for a business retreat, a family reunion, or any of a number of uses that one would make of a second home that is available periodically throughout the year.
Hassle-free Ownership
Another important benefit of fractional ownership is that they are completely hassle-free. In addition to having a staff for personalized service at your disposal, with fractional home ownership, you never have to worry about repairs, maintenance or housekeeping. Everything is included in the price and annual fees and taken care of by the professional management company. Upon arrival at a Fractional vacation home, everything is setup pre-arrival and the vacation can begin.
Appreciation Potential
To date there have been very few fractional resort developments. The demand is high. As a result, it is likely there will be substantial appreciation, rather than the depreciation that usually occurs with timeshares. Real estate experts say that the outlook for investment appreciation appears excellent. You can expect at the very least an appreciation parity against other real estate in the resort area in which the fractional is located.
Prices
To buy a fractional, you pay a one-time purchase price and then a yearly upkeep fee that covers all of the expenses associated with property ownership and its use and services. What do fractionals cost? Prices vary based on the size, amenities and location of the individual property. But most are in the $100,000-$500,00 range. Keep in mind that these are truly top-of-the-line homes that would cost you two to five times as much if purchased outright as wholly-owned vacation homes.
Comparison of Fractionals to Timeshares
How do fractionals compare with timeshare? They really don’t. Fractionals are far more exclusive and include many more luxury amenities and services than timeshares. They tend to be larger homes, usually three to five bedrooms. Timeshares usually allow you use for just one to two weeks per year. Fractionals offer from two to 13 weeks, and those don’t necessarily have to be consecutive weeks.
So why do fractionals tend to appreciate while timeshare usually depreciate? There are a couple of reasons. With fractionals, more of the buyer’s dollar goes to high quality finishes and ‘bricks and mortar’ vs. sales commissions which can be as high as 40%-50% with timeshares. Furthermore, timeshare values have historically been poor because of the large number of resales on the market, not to mention a continuous stream of new developments.
In Mexico, foreigners can purchase fractional ownership property as long as they own it through a Mexican-owned company or in a trust known as a Fideicomiso.
