real estate

Fractional Home Ownership

By Jeffery James McClintock

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Fractional Home Ownership

A second home has been called the ultimate discretionary purchase --
something that many people would like to have but no one needs. People who
do own a place at the beach, the lake or in the mountains often are quick to
express frustration at not being able to spend more time there. It hardly
makes sense to have the expense of a mortgage, upkeep, insurance and taxes for a place you don't use more than a couple of weeks a year.

To deal with that situation, family members and friends often have joined
forces to buy a place. It cuts down on the cost and everyone gets to enjoy a
place that's more than just a hotel room. In 1994, a new concept debuted in
the United States -- fractional ownership of vacation homes. Patterned after
fractional ownership of private jets, the concept formalizes the idea of a
group of relatives or buddies pooling their resources to buy a getaway

Fractional ownership offers individuals the opportunity to buy partial
ownership of a really nice place in a resort area. We're talking chalets
with walk-out skiing in the Rockies, oceanfront houses or condos, or island
properties in the Caribbean and Europe, often with resort-style amenities
including on-site restaurants, fitness clubs, golf courses and a concierge

The arrangements usually divide the ownership into fourths, eighths, or
13ths, with each owner having an equal number of days a year to use the
unit. The owners buy their shares from a management company, which handles maintenance and scheduling everyone's time.

Similar to time shares If it sounds a lot like a time share, that's because there are similarities. The more fractions that are sold, the more it resembles a time share. Bothcan be bought as deeded properties (some time shares are now sold as club memberships instead of time in a specific unit), and can be rented out, shared with family and friends, sold or left to someone in a will.

Like time shares or any kind of resort property, there are small players and
big guns in the business. If you're in love with one locale and could see
yourself going back to the same place over and over, a small company could
be just the ticket. If you'd like more flexibility, some major corporations
such as Ritz-Carlton, the Four Seasons, Disney and Marriott also are in the
business. All of them have resorts in various parts of the country, and even
in the Caribbean and Europe, with the opportunity to swap time at other

The big difference: money The big differences between time shares and fractional ownership properties are prices, financing and fees. While time shares can be had for a few thousand dollars, fractional ownerships can run $100,000 or more -- much more.

With that kind of price tag, buyers aren't subjected to the "you have to
make a decision today" aggressive sales pitch that is still the prevailing
strategy in the time share industry. While most developers offer their own
financing for time shares (the terms are akin to those of a personal loan,
in the 14 percent interest range), it's generally not an option for
fractional ownership properties because the purchase is too large.

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