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Unwind in Paradise! Fractional Ownership for Vacation Homes

Vacation homes are the most prevalent use of the fractional ownership concept. Fractional ownership is not a timeshare. The distinction is that a fractional share owner owns a deeded share for a fraction of the property.

Vacation homes are the most prevalent use of the fractional ownership concept. After becoming popular in Europe, the system first spread in the U.S. to ski resorts, and after that to the East and West coasts. Now fractional vacation homes are expanding throughout the country, predominantly in Florida, in golf developments and in other resort areas.In addition, fractional ownership is offered at destination or residence clubs currently being constructed and run by some key players -- Ritz Carlton, Starwood, Four Seasons, Hyatt and others. These companies administer sizeable resorts in California, Florida, and the East Coast. Residence clubs also exist on a smaller scale, frequently as part of a hotel or residential development whose principal purpose is to accomodate short-term guests or to sell residences to individual buyers. In spite of the diversity of forms a fractional ownership vacation home may take - from luxurious single-family seaside properties to what are essentially 5-star hotels and resorts; from seaside condo developments to residence clubs that are part of a larger development - all together they share a lot of common characteristics.Most significantly, fractional ownership is not a timeshare. The distinction is that a fractional share owner has possession of a deeded share for a fraction of the property. On the other hand, the timeshare "owner" is entitled to use his property for specific periods of time; he has no ownership rights in the property.An different structure that is used at times for single-family vacation homes is the Fractional Property LLC, essentially a holding company in which each share owner has an equivalent interest.Whether the fractional share owner possesses a deeded portion of the property or a share in an LLC, there are a number of advantages. If the property goes up in value, owners' shares also go up in value. Share owners can acquire, sell, trade or otherwise convey their fractional share of the property. Share owners, as members of the Property Owners' Association, have input into decisions affecting their property. There may be tax advantages to the share owner from deducting mortgage interest or the fractional share of the depreciation on the property.A number of fractional vacation companies manage properties in different parts of the world. Owners can purchase a fractional share in a single property, but are allowed to trade right of use to their vacation home for use of a home in another location.Fractional ownership vacation homes are handled by a property manager who manages all business affairs, organizes scheduling of owners' visits and may take care of various things to make the owner's arrival uncomplicated and smooth. Owners' individual things may be taken out of their private storage area and placed in the home, ready for their arrival. The refrigerator and liquor cabinet may be supplied with specified items; tee times, tennis lessons, child care, spa appointments and charter fishing can be set up.A fractional share of a vacation propert gives the owner the right to a specified amount of use of the home. A 1/13 share means the owner enjoys four weeks in the property every year; a 1/6 share allows for eight weeks per year. Some fractional properties have an established calendar, with owners' weeks rotating during the year so there is fair distribution of preferred holiday times. Some developments allow owners to trade time among themselves; others have complex bidding procedures where an owner may have numerous fixed weeks per year and numerous floating weeks, to be determined year by year.All the elements of the legal and financial structure of the fractional vacation home are transparently described in the deed, LLC Operating Agreement, and other management instruments. Most fractional properties have a monthly or quarterly fee assessment that provides for operating expenses, management, taxes, insurance, repairs, landscaping, and a fund for furnishings replacement. Annual accounting of all expenses and budget projections for the approaching year are made available to share owners for approval and input.The increasing popularity of fractional ownership vacation homes is explained by the remarkable advantages they afford - mainly, that of having access to a luxury vacation home without the expense, liability or headaches of owning it outright. No repairs, no shopping (unless you want to), no worries. All the owner has to do is show upFind Article, unpack the suitcases and enjoy.Financing options for fractional vacation homes will be covered in a separate article.

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ABOUT THE AUTHOR


David Yarian, Ph.D. writes the blog Florida Fractional Ownership. Visit his environmental website.



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