Fractionals: Have your vacation home and afford it, too
By Jay MacDonald • Bankrate.com

If the cost were the same, which would you rather own: a vacation home in the hills of Tuscany or holiday digs in London, Aspen, South Beach and Rio de Janeiro?

If you prefer the latter, you're not alone. A growing number of Americans are following the lead of well-heeled Europeans and investing in fractional ownership of vacation property. For the price of that Tuscan villa, you might own quarter shares in the four other destinations.

"That's exploding," says Andy Sirkin, attorney and partner in Sirkin Paul Associates of San Francisco and Paris, which specializes in fractional ownership. "Every week, we see a 10 to 20 percent increase in the number of calls."

As a fractional owner, you actually become a co-owner of a vacation property; you split the purchase price, maintenance and taxes with your co-owners, as well as the property's appreciation down the road.

The advantages of fractional ownership are numerous:

• Investment diversification. You don't have to bear the full financial burden of a holiday house you will likely only use a few weeks a year. • Buying power. You may be able to buy a far more desirable property or in a better location than you could have afforded alone. • Location. With a do-it-yourself fractional, you're not tied to properties on the tourist strip, and may opt instead to buy in a more desirable -- and affordable -- neighborhood. • Culture cushion. Split the obstacles of setting up house in a foreign country among the group -- or better yet, buy into an already established fractional in your country of choice. • No rental headaches. Although some groups do allow its owners to rent out their allotted time, others prohibit it, as do certain locales. • Equity participation in the property's likely appreciation. • Control over the ownership, maintenance, even the décor. • Travel diversification. Flexibility to co-own homes in several locations rather than being tied to one. • Business expense. Want to reward your employees, woo your clients and write off part of your fractional? You may be able to if you use it for business.

The disadvantages are few but can be significant. Though their number is growing with demand, there are still relatively few lenders willing to finance the purchase of a fractional. All kinds of financial foibles can arise if you fail to carve the terms of your fractional in stone with the help of an attorney familiar with the nuances of this emerging field. The pro rata shares may add up to more than what the property would have cost a single buyer. Be as careful in selecting a vacation fractional as you would your own home, since there is no guarantee it will hold its value, even in a resort location.

Baby boomers lead the way
Sirkin says fractionals reflect the changing lifestyles of baby boomers who want to either recoup some of the outlay on their little-used vacation home or diversify their vacation destinations without having to sell the place or, worse, rent it.