fractional ownership

[Meadbh]

Over the years I've considered buying a cottage. However, it seems a lot of time and money to invest in a place I'll use perhaps one month out of twelve. I'm now about to close on a fractional ownership of a luxury vacation condo. Does anyone else have experience with fractional ownership?

Meadbh

 

[Cut-Throat]

Over the years I've considered buying a cottage. However, it seems a lot of time and money to invest in a place I'll use perhaps one month out of twelve. I'm now about to close on a fractional ownership of a luxury vacation condo. Does anyone else have experience with fractional ownership?

Meadbh

This is called Timeshare. One of the stupidest uses of money available.

Rent! and then you can go when you want and where you want.

 

[Meadbh]

With respect, CutThroat, it is not timeshare. Timeshare owners have no equity in the property. Fractional owners do.

Meadbh.

 

[chrisdut]

I bought a timeshare about six years ago (one of my two biggest financial blunders so far). I do have a deed for the property and equity. The equity is what I could sell the timeshare for to any willing buyer (which is likely to be less than what I paid for it). Maybe I am missing the boat but fractional ownership sounds like a timeshare by another name.

 

[MasterBlaster]

Here's a datapoint...

Timeshares when bought on the secondary market sell for between 20-50 percent of what people paid for them.

Therefore avoid the glossy presentations and, if you just have to, buy a timeshare on the secondary market. But before you do... Do your homework. And make sure that you understand the annual maintenance fee(s).

 

[Martha]

I am sure the lingo is used different ways in different places, but generally the term "fractional ownership" is used when there are relatively few owners for an interest in property, maybe two to 12 owners. Timeshare is generally the term used when there are more owners involved. In my state the term is used interchangeably. A coworker is working on one right now that he calls a timeshare but each owner will own 25% for a total of three months a year per owner.

 

[Kitty]

Oh, Oh ............. the pain of it all

I got suckered into buying a time share years ago and regret it to this day.

Fractional ownership just sounds like it could be a big problem. There won't be the usual ability to trade much unless it is with the other owners and what if one or more owners doesn't pay their share of the fees, taxes, maint. , insurance yadda yadda yadda. How are disagreements with the other partners going to be resolved? Possible big trouble ahead Like the Man said rent and let someone else worry about it

I wouldn't touch it with a stick

Kitty

 

[AltaRed]

I wouldn't touch it with a stick

Neither would I.

 

[honobob]

Fractionals are a form of ownership of boats, condos, single family residences and even high end estates.  Lake Tahoe has fractionals that may include 2-12 owners that split times to every 12th week so everyone gets ski time or a Hawaii estate may have 4 owners that have prescheduled 3 month intervals and the price may reflect the time of occupancy.

The high end of these includes a concierge service that maintains the property and has YOUR requests available at the time of your arrival.  You pay for this but if you own a condominium you pay for basic services and management that a single family home owner would do on his own.  It's not rocket science.

But the devil is in the details!!  Imagine buying a house with your exhusband, your mother in law, your best friend your senior year of high school, and your boss from your first job.  Get everything in writing!!!

The place should be a place that everyone wants to go to and you should not pay a huge preimum.  Generally the person putting the fractional together will expect some compensation for his time and effort but beware of any timeshare like fees for promotion.

The upside is that you are guaranteed a place to stay of your choice and APPRECIATION and the tax aspects!  

Disclaimer:  I've done well with real estate in 4 different decades in three different states.  I plan to retire to a Diamond Head Hawaii condo that I will "house swap" with hopefully the same 3-12 people a year around the world.  I am looking into selling my rentals thru the next 10-20 years and would investigate the possibility of converting that equity into fractional ownerships.

So maybe Jan-March in Diamond Head,  April-June on a Carribean fractional yacht, July-Sept in a European villa and Oct-Dec in a Manhatten penthouse.   All Fractionals.

Do not be afraid of Real Estate.

 

[Texas Proud]

I am like most saying stay away....

But I do have to say I meet a couple of people in NY that had bought a few... one was in a vacation spot that is hard to get something cheap in NY (don't ask me where).. he had it for years and it was now 'cheap' for his family.. and as he said, I have a whole apartment, not a hotel... if he decides to go somewhere else, he said he gets paid the full years maintenance fee OR can trade it for more weeks at great places...

His other was down in Florida when he went to Disneyland (that is FL is it not??).. but, I would think that this one was a pipe dream in his mind... there at LOTS of places down there...

He also had a two week one in Hawaii every 4th years... man, can they slice these things in many ways..

 

[Meadbh]

Thank you all for your comments, some informed, some less so!

Many of the commentators assume that this is purely a matter of economics. For me this is a lifestyle decision. Honobob and Texas Proud describe situations which best match my fractional ownership. I am looking forward to doing the exchange with Tuscany sometime.....BTW, my equity has already appreciated by 30%.

I will share my experience over time.

 

[Cut-Throat]

.....BTW, my equity has already appreciated by 30%.

I will share my experience over time.

30% since yesterday ! - Wow!

I'm now about to close on a fractional ownership of a luxury vacation condo. Does anyone else have experience with fractional ownership?

 

[Cut-Throat]

But I do have to say I meet a couple of people in NY that had bought a few... one was in a vacation spot that is hard to get something cheap in NY (don't ask me where).. he had it for years and it was now 'cheap' for his family.. and as he said, I have a whole apartment, not a hotel... if he decides to go somewhere else, he said he gets paid the full years maintenance fee OR can trade it for more weeks at great places...

Most all of the people that I know that go to Las Vegas always win too.

 

[kcowan]

Two things to watch:
1) Annual maintenance fees and look for any caps on its growth,
2) Total the prices of fractional shares and compare to going rates on fulltime ownership. If it exceeds it by 10% stay away.

I understand you have an offer to purchase but have not yet closed. Investigate resale opportunity. Maybe you can lock in 20% on an immediatre resale. If not then what is wrong with the picture?

 

[youbet]

2) Total the prices of fractional shares and compare to going rates on fulltime ownership. If it exceeds it by 10% stay away.

Good advise kcowan.

The fractional ownership situations I investigated all violated this warning.  In every case, the sum of the parts equaled more than a 10% premium over what the property would have sold for to an individual.  Sometimes by a lot more than 10%.

If I'm not mistaken, the primary reason for a property to be offered on a fractional basis is to get a significantly higher price than could be obtained selling to an individual.  This is often reflected in the secondary market where the resell prices are more in line with individual ownership market value.

Still, I believe there can be some utility to fractional owners. But you need to clearly understand what you are getting involved with and caveat emptor.

 

[Meadbh]

30% since yesterday ! - Wow!

No, since I put the deposit down two years ago. I'm not THAT stupid!

 

[doug]

Disclaimer:  I've done well with real estate in 4 different decades in three different states.  I plan to retire to a Diamond Head Hawaii condo that I will "house swap" with hopefully the same 3-12 people a year around the world.  I am looking into selling my rentals thru the next 10-20 years and would investigate the possibility of converting that equity into fractional ownerships.

So maybe Jan-March in Diamond Head,  April-June on a Carribean fractional yacht, July-Sept in a European villa and Oct-Dec in a Manhatten penthouse.   All Fractionals.

Do not be afraid of Real Estate.

That's the ideal lifestyle and goal for me/us too. We have real estate in 2 of the 4 locations above (HI, and Caribbean), so just need the Europe and Manhattan locales Real Estate has been very good too, and anticipate that these types of properties ('luxury retirement areas') will be in great demand and will see continued appreciated. honobob - Nothing wrong with combining lifestyle and investment simultaneously right?

My only issue however is generally most people tend to want to go to the areas you mentioned during the same time period. From what I've gathered, you've certainly picked each of them all at the right time of year. If I were in your're "group of 12", I'd want those months in those locals too!

Also, do you know of any fractional ownership luxury condo in Manhattan?

 

[donheff]

The new thing is called a "Destination Club." You buy a membership (theoretically, usually 80 - 100% refundable if you drop out) and an annual fee for two to four weeks residence. You get to reserve sapce in club owned luxury residences - fancy houses and condos in exotic locations. A lot of mixed reports but they are popular enough to be popping up all over. Examples:

www.akdestinations.com
www.havensclub.com
www.highcountryclub.com

 

[larry]

I am like most saying stay away....

His other was down in Florida when he went to Disneyland (that is FL is it not??)..  but, I would think that this one was a pipe dream in his mind... there at LOTS of places down there...

He also had a two week one in Hawaii every 4th years... man, can they slice these things in many ways..

They can't slice it to make Disneyland appear in Florida. Disneyland is in California, Disneyworld is in Florida.

I agree, stay away unless you are absolutely sure of what you are getting yourself into and then at that, buy someone elses mistake.

 

[jj]

I've dreamed about the scenario of owning a part of a property for a few years now.  Never taken the leap.  An interesting website is ownergroups dot com.  They seem to have a way of working out the details and have apparently brokered lots of deals between interested parties.  Browse here at your peril....   

 

[honobob]

Doug
I'm not familiar with Manhattan real estate , just think it is a destination I'd like to be for a time and think the kind of appreciation I'm used to would be there. 

I'm also not so set on my time frames.  There's probable only three months of the year that I'd slightly prefer not to be in Honolulu and I could definitely spend any time period in NY.  (April, May June,Springtime activities! )(July August, Sept. Central Park picnics sports concerts Fall colors) (Halloween, Thanksgiving, Christmas and New Year)(Jan Feb March? Big Fireplace Full Bar!)

At this point I'm more interested in Swapping places . That could potentially result in meeting people that are like minded that I could possibly persue the fractional  option with.  I'd rather put my  own deal together with people that I kinda know(at least by 6 degrees).  I've always been the guy to put ski/rafting/vacations together from a good mix of people.  I think the internet will make that more available over the next few years.    Might meet some on this board.  KCowan talks about swapping but don't know if they go thru an established service.  I would hope to get into a flexible arrangement that still provides a certain amount of control. 

Maybe within the year when I retire there will be enough interest on this forum to have a Fractional/Swapping/Get my RV while I'm in your boat  category!

 

[kcowan]

... KCowan talks about swapping but don't know if they go thru an established service.  I would hope to get into a flexible arrangement that still provides a certain amount of control. 

Maybe within the year when I retire there will be enough interest on this forum to have a Fractional/Swapping/Get my RV while I'm in your boat  category!

In my experience, NYC people are interested in swapping in SF, Phoenix and Europe. We stay at Casablanca B&B right by Times Square. Our friend from there stays at a 5-star hotel here in Vancouver. Definitely a different league.

 

[Meadbh]

Just returned from my first vacation in my fractional resort property. It's quite spectacular. I am totally rejuvenated. FYI, one week of rental per year will cover all ongoing expenses. Value (to me, if not to you) of my "home away from home" = priceless.

Meadbh