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You need to understand what fractional is. Here’s what to know.

What is fractional?

The term fractional is used to describe partial ownership of an expensive property utilized as a second home. The title deed for the property is divided into a limited number of fractions. These allow the fractional owners annual use of the home for a period correlated to the fraction owned.

Generally, the number of fractions are such that each title owner has use of the property for a limited number of days each month, and in some cases, for longer periods.

Deeper definition

Unlike time shares, fractional ownership means that you legally own a share in the property. This means when you buy fractional, you obtain a fractional title or deed, which is yours for perpetuity, or until you sell it.

This form of ownership is typically reserved for expensive properties or similarly costly assets, such as power boats, aircraft and recreational vehicles.

The number of fractions is usually set at 12, providing access for one month. But it’s also common to restrict the fractions to as few as two to four, giving each fractional owner greater access to the property.

The small number of fractions means it’s easier to manage how the property is used. Also, depending upon the shareholder agreement, fractional access may offer greater flexibility for when you can use the property than is the case with restrictive time-share arrangements.

As an owner of a fractional, you are jointly responsible for the upkeep of the property. This includes maintenance, taxes and utilities. Because there are only a few owners involved, wear and tear is lower. Most fractional owners hire an independent property management company to maintain and clean the property.

Fractional example

James and Isabella enjoy snow skiing but are put off by the high prices they have to pay for accommodations in their favorite ski area in Wyoming. Because they get away as often as possible, they decide to investigate fractional ownership.

They are fortunate to locate a suitable property with time slots that suit the skiing season. They go ahead and purchase a fraction, which in this case amounts to one month per year when they can use the property.

Are you interested in fractional ownership of a vacation home in a scenic location? Obtain a personalized fractional ownership loan offer through Bankrate.

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