As you browse real estate listings in popular vacation areas, you may come across many fractional or partial ownerships for sale. No, these are not timeshares; while fractional ownerships share a property with unrelated owners, the legal arrangement is different than a timeshare. The main difference is that the owners in a fractional ownership have titles/deeds to the property. In a timeshare arrangement, the buyers have only purchased the right to use the property.
Purchasing fractional ownership in a property has many advantages. Here are some reasons to consider investing in this option.
Investment Benefits & Risk Mitigation
As fractional ownerships are deeded to the owners, each owner has stake in the home. That means that if the home appreciates, the owner can sell his or her stake and enjoy the capital gains.
Similarly, investing in fractional ownership of a property allows each owner to take on less risk than if the owners were to own the entire property. The ownership share can be sold at any time, just like any other type of property.
Fractional ownership arrangements allow maintenance, housekeeping, and tax costs to be split among the owners. Not only does this lower the recurring costs of owning a vacation home, but it also makes the home easier to maintain.
Owning just one portion of a home allows a buyer to afford a more expensive home than they would otherwise — maybe a larger home, a more luxurious home, or a home in a more desirable area. The price of an ownership stake is equal to the portion of ownership; for example, a ¼ ownership in a million-dollar home would cost only $250k plus any annual dues.
The increased affordability also provides the opportunity to invest in several vacation properties.
It can be difficult to maintain (and afford) vacation properties in multiple locations. However, with the fractional ownership model, a family could own stake in several properties in various destinations.
Varying Ownership Stakes
Fractional ownerships can be divided into any number of stakes. In the Vail Valley, we have properties on the market with between two and thirty-two owners. If an owner only plan to spend a few weeks per year in the destination, he or she may seek out a lesser ownership stake than someone who plans to spend more time there.
Many fractional ownership arrangements allow owners to buy into a reciprocity program and stay in other properties around the world. Essentially, an owner can trade their weeks at the property they own for weeks at another property. This model is fantastic for families or people with changing schedules, as the weeks can be made more dynamic.
Feeling of Home
Fractional ownerships allow a family to truly make the property a “home away from home.” The owner will always stay in the same residence, which comes with many comforts — knowing where everything is located, having a designated bedroom, and making memories year after year.