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Fractional Ownership Explained

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FREQUENTLY ASKED QUESTIONS


What is Fractional Ownership?

Fractional Ownership is a way for multiple owners or members to share the cost of an expensive asset such as a high-end resort property. This type of ownership affords you all the benefits of having a second home, but without all the hassles of cleaning and maintenance and you purchase at a “fraction” of the cost of whole ownership for a comparable property.

Fractional Ownership of vacation homes, also known as Private Residence Clubs (PRCs) allows you to purchase a deeded interest in a vacation property. These properties are typically found in luxury resorts where expensive real estate is more the norm than the exception. Depending on the property or club you purchase you receive anywhere from 2 to 12 weeks of home ownership privliges per year. The residences provide all the features of a luxury home such as fully equipped kitchens, spacious closets and storage for your sports equipment combined with all the amenities and services of a luxury 5 or 4 star hotel, such as restaurants, room service, fitness facilities, concierge and housekeeping services. Depending on the design of the property your ownership may be a hotel suite, cottage, townhouse or single-family home. The price range is as wide as the selection and will depend on the resort destination, location within the resort, number of weeks, number of bedrooms and level of luxury.

How is Fractional Ownership or membership in a Private Residence Club evidenced?

Title is typically evidenced by a real estate deed which is recorded and guaranteed by a title insurance policy. Ownership is held as tenants in common with the other purchasers/members.

Can a fractional property or membership in a Private Residence Club be sold?

Yes. Just like any other form of real estate an owner’s undivided, deeded interest can be sold or transferred. Some clubs have resale policies and reserve the right of first refusal when a membership is being sold.

Can I visit another location or am I limited to one resort location? Are there exchange privileges?

Exchange privileges are dependent on the particular Private Residence Club you purchase. Certain clubs affiliate with exchange companies or may have a property portfolio under the same brand name that you can exchange into.

Is Fractional Owneship the same thing as Timeshares?

Timeshares and Fractional Ownership are related in that they both involve shared ownership of a vacation property, but that is where the similaities typically end. Traditional time share gives you the right to use the property, generally without a deeded interest in the actual real estate. Some timeshares have a points-based system in which the owners are awarded points that can be redeemed at other properties run by the same company. The price point for a timeshare can be dependent on the number of points you purchase. Fractional residences are more similar to true second homes, have fewer owners per residence, operate like 4 and 5 star hotels and tend to be much more amenity rich than their older sibling timeshare.

Why buy a fractional property or membership in a Private Residence Club over a traditional second home?

Although most members of a Private Residence Club can afford a traditional second home they can not justify the expense and all the carrying costs. Nor do they want to spend their precious vacation and family time dealing with maintenance nightmares that come along with owning a second home. Also, when you take into consideration the average second home owner only uses their property three to four weeks per year, fractional ownership just makes sense.

Is bank financing available for fractional properties and Private Residence Clubs?

Sometimes. Prior to the economic downturn of 2008, financing for fractional properties was readily available.  Today, some new developments will offer financing or have arrangements with our local banks.  As lending guidelines loosen up more financing options are becoming available.  Since there is no hard and fast answer to this question we recommend contacting Fractional Specialist and we will put you in contact with the best lending institutions based on your individual needs.

Are fractional residences and memberships in Private Residence Clubs tax deductible?

Yes. In general, interest on a loan taken out to purchase a fractional residence is tax deductible.

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