What is shared or fractional ownership?
Shared or fractional ownership is exactly what the name entails: owning a fraction of a piece of real property. Most often this type of ownership is used in resort markets for vacation homes. The percentage of ownership depends on the property. I have seen ½, ¼, and 1/6 ownership opportunities here in Summit County. This form of real estate ownership falls between full ownership of an individual vacation home, and a time-share, which typically is one to two weeks of a year. With fractional ownership, owners get the use of the property more often than with a time-share, at a fraction of the cost of purchasing full ownership of a property.
Each property will have different governing documents specifying which owners own which weeks, usually on a rotating basis. The property will be managed similar to a homeowner’s association where fees are assessed to owners based on their percentage of ownership.
What are the benefits of fractional ownership?
With fractional ownership, your investment dollar will buy a higher quality piece of real estate than if you were purchasing a full ownership property. For example, you will be able to own a more luxurious vacation property, with a better location, more space and nicer amenities than if you spent the same amount of money on a full ownership property.
Prices in the resort market real estate sector have increased steadily in recent years. These markets have not seen any slowdown in real estate sales or prices. Because of this, vacation homes are becoming too expensive for many people to afford. However, fractional ownership offers an opportunity for people to own a luxurious and enjoyable vacation home at reasonable prices.
What is the downside of fractional ownership?
Fractional ownership may not be the right choice for every buyer. First, you may want to use your property on a holiday week, but it is not your week. For example, with ¼ ownership, you will get to use the property every fourth Christmas and every fourth Spring Break. If you think you would use the property for every vacation, shared ownership may not be right for you.
Second, a property management company will be necessary to keep the property clean, maintained, and ready for the next owner to use. Without one, owners may be disappointed at the way the place was left from the previous owners. This will incur additional costs for all the homeowners.
What is the future of fractional ownership?
Fractional ownership is a relatively new concept in real estate ownership created because of rising resort real estate prices. The resale market for fractional ownership is still being developed as fractional ownership continues to take hold in resort markets. I anticipate that as fractional ownership becomes prevalent, the resale market will grow.
Where do I get more information?
If are interested in learning more about fractional ownership, please email me at firstname.lastname@example.org, or call me at (970) 389-8388. I look forward to speaking with you.