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Fractionals: Have your vacation home and afford it, too

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The fractional solution
There is little doubt that America is on a tear for vacation real estate. According to the National Association of Realtors' most recent "Vacation Home Buyers Survey," vacation-home sales rose 4.7 percent to a record 1.07 million in 2006, up from 1.02 million the previous year. Vacation homes accounted for 14 percent of all homes purchased last year, up from 12 percent in 2005. Four out of five owners surveyed said they purchased the home primarily for vacation use.

But Christine Karpinski, author of "How to Rent Vacation Properties by Owner," says those dream getaways often come with some unrealistic expectations.

"Very few people buy a vacation home with the intention of renting it out; they always think they will be able to use it, but people just aren't realistic," she says.

Karpinski is now affiliated with, which lists some 85,000 paid rental listings for homeowners looking to recoup some of their vacation home investments. HomeAway charges between $140 and $400 for a one-year rental listing, depending on features. She finds fractionals a more realistic alternative to vacation-home ownership -- if you think ahead.

"It's a great way to build equity," she says. "A lot of times people don't get into partnerships because they have this idealistic view of the future; they want to retire to Florida or Hawaii. But a lot of times, those decisions are made between the ages of 45 and 55, when you don't necessarily know your future. Ten years later, you may have aging parents and new grandchildren to where you don't really want to move to Hawaii."

How to draft the agreement
Hammering out the details of a fractional falls somewhere between drafting a partnership agreement and writing up governing documents for a condo association. Sirkin estimates the average cost at $2,000 to $4,000, with an additional $400 to run it by a real estate attorney in the county or country where the property is located -- definitely a good idea. But remember, those costs are shared by your co-owners.

Most of the fractions Sirkin has worked with number four to eight co-owners; the number is often driven by the desirable number of weeks each year and the proximity of the property. Among domestic destinations, Colorado ranks first, followed by Florida, Hawaii, California, Nevada, Texas and the Carolinas. A quick online search for "fractionals + (your desired location)" will put you in touch with local Realtors, developers and others in the know.

McAllister, who is currently working on fractioning a 55-apartment Tuscan villa and a golf estate at St. Andrews, says fractionals allow even average Joes to have their vacation home and afford it, too.

"If you buy at a sensible price, there is a very good chance that it will appreciate in value, whereas time shares do nothing but depreciate. And whichever way you look at it, either as an investment or free holidays for X number of years, there's very little risk."'s corrections policy-- Posted: Aug. 9, 2007
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