Author: J. J. Johnson

Fractional ownership properties and private residence clubs are proving to be desirable vacation properties for purchasers, who can enjoy the benefits of second-home ownership at an affordable price level. This relatively new form of shared-ownership, where the purchaser has title to a fraction of the property- typically 1/4 to 1/12- features the ability to resell the property or transfer ownership interest, like any other real estate.

The widely accepted industry statistics for second home owners indicate the average usage is about 30 days per year. The fractional interest purchaser is able reduce the investment to match this usage, while enjoying the benefits of owning a unique property. For example, a 1/8 interest would entitle usage of 6 1/2 weeks per year, while significantly reducing the cost of owning and maintaining the property.

The concept of shared ownership was initially utilized as a marketing tool for selling yachts and private jets, recognizing that these are expensive items with limited overall usage. This same concept is now becoming accepted in the second home vacation property market, in that it is the property itself that desirable to use, usually located in a resort community. Assuming a 1/8 share of a property for $175,000, the purchasers are enjoying a property with a value probably in excess of $1,000,000. An investment of $175,000 won’t buy much in most resort communities.

Like condominiums, there are additional fees associated with ownership in the form of a monthly assessment, typically including taxes, insurance, deferred maintenance, and concierge/property management labor. The amount of these fees can vary widely according to the services and amenities offered. Private residence clubs, featuring services up to the level of 5-star hotels, have prices and monthly fees reflecting the cost of these services. On the other end of the spectrum, shared ownership of a single-family residence would have minimal fees, reflecting the lower costs of labor and maintenance.

Many real estate developments are now featuring fractional components within the project, bringing a level of affordability previously not available to investors. For example, a development project in McCall, Idaho, featuring lots in the $300-500,000 range and homes averaging $1.5M, has built several residences and offers 1/8 fractional ownership at $175,000. According to the developer, they are not only successful in selling to the fractional interest buyers, but are also cross-selling fractional interest shares to purchasers of lots who are not yet ready to build.

Probably the most positive news for fractional interest purchasers is that these assets are appreciating, with gains being made in the resale market. While there is never a guarantee that property values will appreciate, resale of fractional interests has generally been higher than the original price, according to industry consulting firm Ragatz and Associates. One project we are working with has resold shares that originally sold under $80,000 for prices exceeding $130,000.

The other significant new development is the availability of traditional mortgage financing for these purchasers. While there are very few banks and financial institutions offering loans to fractional purchasers, the few who are enable these customers to leverage their purchase with a 20% down loan amortized over 30 years. As more of these projects are built and sold, we expect to see more lenders enter the market, in turn providing more options for these customers.

Author: Cristina Angueta

Well the technical definition of a Timeshare is: a form of vacation property ownership. Each owner has a specific time they can use the property. A time share is a name given to a piece of property shared among a number of owners. This involves the use and cost of maintaining the property.

But as more and more properties are being converted into timeshares, flexible options cannot be ruled out. This flexibility offers owners the option of choosing more than one destination and also more than one specific time of a year.

Although the majority of these properties are condominium resorts it will not be a surprise if you find a hotel, motor home, cruise, houseboat, yacht, private jet or a campground. The choices are increasing every day. The idea of a timeshare property originated in Europe in the 1960s when the property rates were skyrocketing and it was impossible for people to afford a full time vacation home. But by sharing the ownership, the burden of maintenance and other costs on a owner were greatly reduced. These also boosted the fortune of real estate developers as they were able to successfully market and sell the properties to a greater number of people. But a key point to remember in timeshare properties is that a timeshare is owned by a number of people who have no relation to one another, unlike a standard home ownership.

Timeshare properties are usually found in warm destinations like Orlando where people like to vacation a lot. They can also be found in cold weather areas near ski resorts. These properties are typically furnished in full and usually have one to three bedrooms, multiple bathrooms, a kitchen and a living room. It may not come as a surprise if you find these properties with indoor or outdoor pools. They have become a common feature of most timeshare properties nowadays.

The typical duration of a timeshare ownership unit is one week. Depending on what time of the year you own the property the price may vary. For example, during the month of April in Florida it will be much higher than in August. So the rates may vary with varying season and demand. Some resorts give color coding to different seasons depending on the demand. For example some resorts term high demand season as red season meaning the prices of the timeshare will be highest in that season.

Timeshares can usually be inherited by your children like any other real estate property. Not only is it a great vacation but also a great investment. Most people rent their properties to others when they don’t use their time. This has a double advantage. You earn rent also along with appreciation of the property with passage of time. Timeshare properties are exchangeable and tradable with other properties in most of the cases. While it may be easy for the owners of the red season timeshares to exchange their unit with other owners in any season, it might be impossible for owners of low season units to get a high season unit in exchange.

There are many types of timeshare properties. A fixed unit, fixed week, deeded timeshare allows you to own a specific timeshare at a specific time each year. A floating time agreement allows you to be flexible about the dates that you can use your property. But reservations may be only first come first serve as many owners would like to go for that option. A right to use timeshare is a leased property. You no longer have rights to the property after the lease expires.

Timeshares can be purchased through financing, but mostly the resale properties purchased from individuals are paid in cash. The cost of maintenance, management and cost to maintain common areas like pools and tennis courts are paid by the owners. Fees may very and always make sure to find that out before buying a timeshare. The more informative you are the less likely you’ll be taken advantage of.