Joel Laithy, owner of a small business in Denver, can’t be away from his business often enough to fully enjoy a second home in the Vail area. “My business is doing great financially. I can afford a property in East Vail, but with work and family obligations I wouldn’t be able to use a full ownership condo often enough to justify the cost, so I spent less and got a lot more!” A fractional share in a Vail Valley condo has turned out to be the perfect fit for Joel’s busy life and less taxing on his budget. With 2 kids headed to college soon, waiting to buy the full ownership property has proven to be a smart move.
For $200,000, Joel purchased a share in a luxury mountain condo. He will be able to use the two-bedroom, furnished home for at least 21 days a year, plus have owner privileges at other resort destinations and access to recreational and spa facilities. Plus, he can write off the interest he pays on the home equity loan he used to purchase his fractional share.
Mitchell is one of the increasing numbers discovering “fractional ownership” of vacation properties, which allows multiple people to share ownership of a luxury house or condominium.
As with timeshare vacation programs, owners will confirm or schedule their visits to the property through a central management team. But unlike timeshares, in which participants are essentially buying membership to a points-based vacation system and not guaranteed they will be able to vacation in their destination of choice, people who buy into fractional properties are deeded owners of the physical real estate at their “Home Resort” They are guaranteed a certain number of weeks of vacation time per year based on the percertage of ownership they purchased. Fractional owners have the right to sell their interest or leave it to their heirs.
Fractionals are beginning to flourish again because the inventory of full ownership properties is very limited and the price point of fractional homes gives more people access to expensive resort areas such as Aspen and Vail.
Ownership terms and the percent of interests sold per home will vary among developments. At some properties owners buy a primary or “fixed week.” Those owners will have the same vacation week in the same condo each year. At others properties owners have more flexibility and make reservation requests for their vacations multiple times per year. Most fractional homes allow you to use the property above and beyond your reserved weeks. Fractional owners become part of a homeowners association, just like in a condominium development.
Most fractional homes in resort destinations typically feature concierge service, valet parking, luxurious spas, daily housekeeping and top-notch restaurants.
The concierge can help you find a babysitter, or buy your groceries. You can store your ski gear at your fractional home, and someone might even warm your ski boots before you put them on your spa-pampered feet. You can display your family photos, and when you arrive the next time the staff will have placed them right where you left them, even though other co-owners may have stayed at “your” house since the last time you visited. From the moment you walk in, it feels like your home, and it’s a hassle-free, maintenance-free environment.
A fractional property may be less expensive than buying a vacation home, but that doesn’t mean all buyers pay in cash. Now that the recession has past, mortgages from local banks are available for fractionals again. We’ll discuss fractional financing next month.