|Fractional ownership: Get a piece
of a vacation home
A second home has been called the
ultimate discretionary purchase -- something that many people would
like to have but no one needs. People who do own a place at the
beach, the lake or in the mountains often are quick to express frustration
at not being able to spend more time there. It hardly makes sense
to have the expense of a mortgage, upkeep, insurance and taxes for
a place you don't use more than a couple of weeks a year.
To deal with that situation, family members and friends
often have joined forces to buy a place. It cuts down on the cost
and everyone gets to enjoy a place that's more than just a hotel
room. In 1994, a new concept debuted in the United States -- fractional
ownership of vacation homes. Patterned after fractional ownership
of private jets, the concept formalizes the idea of a group of relatives
or buddies pooling their resources to buy a getaway place.
Fractional ownership offers individuals the opportunity
to buy partial ownership of a really nice place in a resort area.
We're talking chalets with walk-out skiing in the Rockies, oceanfront
houses or condos, or island properties in the Caribbean and Europe,
often with resort-style amenities including on-site restaurants,
fitness clubs, golf courses and a concierge service.
The arrangements usually divide the ownership into
fourths, eighths, or 13ths, with each owner having an equal number
of days a year to use the unit. The owners buy their shares from
a management company, which handles maintenance and scheduling everyone's
Similar to time shares
If it sounds a lot like a time share, that's because there are similarities.
The more fractions that are sold, the more it resembles a time share.
Both can be bought as deeded properties (some time shares are now
sold as club memberships instead of time in a specific unit), and
can be rented out, shared with family and friends, sold or left
to someone in a will.
Like time shares or any kind of resort property, there
are small players and big guns in the business. If you're in love
with one locale and could see yourself going back to the same place
over and over, a small company could be just the ticket. If you'd
like more flexibility, some major corporations such as Ritz-Carlton,
the Four Seasons, Disney and Marriott also are in the business.
All of them have resorts in various parts of the country, and even
in the Caribbean and Europe, with the opportunity to swap time at
The big difference: money
The big differences between time shares and fractional ownership
properties are prices, financing and fees. While time shares can
be had for a few thousand dollars, fractional ownerships can run
$100,000 or more -- much more.
"We have a property in Aspen now that the quarter
shares are $1.5 million," says Doug Freyschlag, president of
Denver-based Alpine Quarters. "Even at that price level, it
still makes just as much sense as any other level."
With that kind of price tag, buyers aren't subjected
to the "you have to make a decision today" aggressive
sales pitch that is still the prevailing strategy in the time share
industry. While most developers offer their own financing for time
shares (the terms are akin to those of a personal
loan, in the 14 percent interest range), it's generally not
an option for fractional ownership properties because the purchase
is too large.