Fractional ownership is a housing arrangement where multiple investors purchase a home together, and they each own partial shares of it. This is typically used to buy upper end vacation homes. Fractional home ownership helps the individual who may not be able to afford a high-end vacation property get involved in this type of real estate deal. When one of the investors decides that they don’t want to own the house anymore, they can sell their fractional share in the property. Selling a fractional share is not like selling the whole property, but it can carry similar characteristics to it. It can also save you a great deal of money when traveling on vacation.
Why Fractional Ownership?
Who wouldn’t want to live the life of luxury and enjoy the rewards that come with owning a vacation home in Italy or the Caribbean? You’ve worked hard for your success, but you don’t want to spend millions on a fabulous pad in Aspen. Making the goals of owning a posh villa is a reality through fractional ownership. Here you will experience all the luxury at only a fraction of the cost. You can still experience the exotic travel adventures without having to purchase an expensive home on their own. Spending millions of dollars for a vacation property that you’ll use only four weeks out of the year hardly makes sense. Plus, think about the expenses to maintain the home, and the property taxes.
The current fractional housing market has moved far beyond where it originally started in a major ski resort. North America, Latin America, Europe and the Caribbean are now the luxurious playgrounds for most buyers to experience upper end vacation homes. The business has grown into a billion dollar a year empire, and with the economy, it is expected to advance at a furious rate. It’s even beating the contemporary vacation home ownership. Studies have shown in 2009 that there were over 200 residence clubs and fractional developments in North American alone, and it can now be found all over the globe. As the vacation home real estate market continues to grow, fractional ownership will gain in popularity because it’s easier on the pocket book. Many luxury hotel groups involved in running some fractional residence clubs include Ritz Carlton, Four Seasons and St. Regis.
What are the Benefits?
In addition to the private residence clubs and luxurious fractional properties, there are some stand-alone properties that can be converted into fractional dwellings. A knowledgeable seller or consulting company that is experienced with fractional investments can be beneficial in this arena. The benefit to the homeowner would be to still keep a portion of the property to utilize throughout the year, but they can still cash out some of the equity on the property and utilize it to pay off debt and other expenses.
The positive aspects of fractional real estate are so overwhelming that many buyers that could easily afford a vacation home are now choosing this option instead. An even more surprising statistic is that most people that already own a luxurious vacation home are selecting to sell off some of the interests to other investors to lighten their expense load. This still allows them the use of the property without the burden of maintaining all the costs on their own.
Molly Henshaw is a freelance writer living in the DC metro area. She is also a contributer for luxury travel experts at The Ritz Carlton Club. Fractional ownership is a great way to have year round travel options!