While most people are familiar with the conventional residential real estate market, gaining in popularity is partial ownership in a vacation home. Tied to regions of the country that focus on tourism and second home ownership, people are taking a closer look at fractional homeownership for an enhanced luxury vacation experience.
By removing the need to cover upfront costs and maintenance fees that sole ownership requires, partial ownership opportunities enable owners to enjoy access to a property for a designated number of days/weeks at a fraction of the cost of sole ownership. Depending on the homeowner association guidelines and rules, there also may be short-term rental opportunities to produce income. While many privately-owned luxury vacation homes sit empty for the better part of the year, fractional ownership properties are often occupied throughout the year.
Unlike timeshares, where the participant is guaranteed a certain amount of time at a property, fractional ownership enables people to actually own part of the title to the property and a stake in the equity. A fraction of the home is deeded to the individual and in turn, they have rights to use the residence, share the income, receive priority access, and reduced rates.
Fractional ownership is common not only with luxury real estate properties but also with other high-priced commodities like sports cars and aircraft, particularly private jets.
This type of investment enables the individual to reap the benefits as the investment increases in value. The owner can use the luxury property for his or her enjoyment and know the home is well-maintained and managed appropriately in their absence. Typically, fractional ownership properties are run by a property management company that handles the reservations, and provides continual upkeep, restocking of supplies and other services.
Usaj Realty associate broker Haley Dyer has years of expertise in fractional ownership in the Vail Valley and provides some insight into this growing area of residential real estate investment. Below she answers a few of the common questions relating to fractional ownership.
Explain the difference between timeshare and fractional ownership.
“Both are frequently referred to as “shared ownership,” and they share similar characteristics.
However, there are significant differences between fractional ownership vs. timeshares. With a timeshare purchase, the buyer has the right to use the property for a designated length of time, usually one or two weeks per year. There are multiple buyers; each has the same right of usage. However, the title remains with the property.
The primary benefit of timeshare ownership is the right to use a vacation home for the same week or two every year without being required to make reservations. Some timeshares use a point system that permits access to properties at different resorts worldwide. In past years, there have been cases in which an owner has offered to give away a timeshare for free because of the ongoing monthly maintenance fees.
Fractional ownership is a method of property purchase involving several buyers, typically 6-12. Each owner holds an equal part of the title and is deeded, just like traditional residential real estate.
The purchasers have a stake in an asset without having to pay for the entire property, maintenance expenses and taxes. Fractional ownership is often available for 3, 5 or 7 weeks per year.”
What is the biggest advantage of fractional ownership and why should people consider it in Vail?
“With fractional ownership, the buyer owns partial equity in a valuable asset. Investing in fractional ownership in the Vail Valley benefits each individual included on the deed of the property, being that this real estate agreement allows each owner equal rights to the property. As the value of the property appreciates, the value of the purchaser’s equity also appreciates. Fractional ownership of vacation homes also allows each of the property’s owners to share property expenses, which in turn, saves all owners both time and money.
Fractional investments in the Vail Valley are an excellent way to experience the benefits of owning a vacation property without having to pay full price on the home or assume full responsibility for maintenance.
When investing in a vacation home or Private Residence Club, owners can expect to spend anywhere from 2 to 12 weeks on the property, taking full advantage of the benefits ownership provides. Spending a vacation in your own home is one more way to fully enjoy your family’s time in the Vail community.”
Poolside at the Timbers Bachelor Gulch, a Property that offers Stellar Fractional Housing Opportunities
What is the most common amount of time you own in a fractional ownership scenario and typically, how many other owners are there?
“An important distinguishing characteristic between fractionals and traditional timeshares is the number of owners per residence. Most Vail Valley timeshares are designed to have 26 owners.
With so many owners, stays are infrequent and short, typically once per year for one week. As a result, there is little emotional connection between the owners and the property. The lack of “pride of ownership” promotes an apathetic attitude toward the property. The high traffic through the unit also means more wear and tear.
By contrast, fractional ownership typically involve 6-12 owners per unit, with owners visiting the property more frequently and staying longer. Each owner holds an equal part of the title and is deeded, just like traditional residential real estate.
The purchasers have a stake in an asset without having to pay for the entire property, maintenance expenses and taxes. Fractional ownership is often available for 3, 5 or 7 weeks per year.
With more significant ownership shares and more time in the Vail Valley, fractional owners have a greater stake in how the property is maintained and how it appreciates over time. Fractional owners take great pride in their investment. With fewer owners, fractional ownership properties are subject to less physical wear and tear.”
Are you interested in more information on fractional ownership in the Vail area? Contact Haley today to learn more about available properties and how you can achieve your goal of a luxury second home in Vail.