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Fractional Ownership: An Intelligent Choice

The case for fractional ownership is very simple: why own 52 weeks of a vacation home when you only vacation seven weeks?

Fractional ownership has it roots in the Lake Tahoe basin, where individual homes were developed and then sold to separate families for shared use according to a use rotation schedule.  Over time, fractional evolved into luxury resort developments with many, many properties (typically high-end condos) and many hundreds of owners.

We’re owners in a fractional resort (Villa La Estancia, Cabo San Lucas) and really like the concept. We arrive to our second home knowing the management company has taken care of every detail — and most importantly, all maintenance. We depart relaxed, knowing when we lock the door, the property will be taken care of until we return.

Fractional is just a great concept when compared to ownership of a standalone vacation home, where part of your vacation time is spent dealing with maintenance issues and subcontractors.

Fractional is a simple concept: no headaches and buy only the amount of time that you need for vacation.  Rather than buying a home near the beach, with fractional you can buy a home on the beach. Here’s an excellent example: The Shores @ The Ocean.  From their website:

“Why buy 100% of a vacation home when studies show most people only spend an average of seven weeks per year at a second home? Instead, for prices ranging from $200,000 – 400,000, you can own a fractional deeded interest in your own premier oceanfront vacation home. This ownership entitles you to all of the benefits of owning a turn-key second home, without the hassles. The Shores @ The Ocean takes care of all the chores and owner requests. You just enjoy your vacations.”

We’ve visited their properties and they are absolutely stunning and well appointed, right down to the convertible in the garage for owner use. For the price of a mediocre home, fractional owners at The Shores own a spectacular home located in a stunning setting.

Fractional ownership is proven vacation home ownership model that just makes sense will only grow increasingly popular as a method of vacation home ownership.

Things to look for when considering fractional ownership:

  • What is the rotation schedule for use?
  • Can you easily exchange use with other owners?
  • Can you exchange use for other properties worldwide?
  • Location, location, location. The same things you’d look for in a wholly-owned vacation home (except with fractional, you can likely afford “more” home in a better location).
  • What type of property management is there?
  • What are the dues? Are they sufficient to cover maintenance (both scheduled and unscheduled) and pay for professional property management?
  • What are the amenities?
  • Are you allowed to rent your unused weeks?

Fractional ownership is deeded ownership and can be resold using traditional channels. As fractional ownership gains in popularity, expect to see more Realtors gain knowledge of the value of fractional and fractional listings to become more common.

“Whole” ownership of a vacation home is a romantic notion, but not as practical (or enjoyable) as fractional ownership.

In light of the worldwide economic slump (especially acute in real estate), many investors are questioning the wisdom of borrowing to purchase real estate. Traditionally, the purchase of a typical vacation home is funded with a 20% (or, in another way of saying it, 1/5th) down payment and the balance borrowed. Fractional ownership offers an alternative: why not put that 1/5th (or less) into straight ownership and not have a monthly loan payment to contend with?

Why buy 100% of a home just to use it 10% of the time?

With that in mind, we know of several fractional owners that own more than one fractional. Vacation here, vacation there…  With, vacation everywhere!