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 HomeAway.com, 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." | 
