| Fractional
ownership of real estate is a growing niche of the second-home market. A
recent study states that one out of 10 homes bought are used for
vacations. (National Association of Realtors). House prices continue to
raise and more people are finding the only way to own a vacation home is
to share it with others. Not a new concept, time sharing of real estate
has been going on for years. The difference is that in a time share you
only buy the right to use the property at a certain time. In a
fractional ownership arrangement you actually have the deed to a
percentage of the property. The cost of the vacation home is shared
between the owners. So are the expenses.
The other difference between a fractional
ownership arrangement and time share is that in the former - the
properties are often more expensive and offering longer periods of stay.
For less money and less upkeep, people
are buying anywhere from half a home to 12-15% of a vacation home with
others.
Smart people consider a fractional
ownership investment in real estate a vacation investment, not a real
estate investment. There are some concerns that the resale market might
not recover the initial investment. It is also important to check out
the management company. If the property is not managed well - the
vacation experience and re-sale value might both be disappointing.
One also must realize that you can't
just show up and enjoy your vacation home. The management company will
work with all the owners and try to get you the time slot you want.
Fractional ownership began in the U.S.
and is also common in the Caribbean. The main drawback is that you can't
get a mortgage on part of a freehold so you have to have funds available
or release the equity in your main home. Check the contract to see when
you can use the property and how much rent you can get when you don't
use it.
With a
fractional vacation home you can
experience the total joy of a second home ownership
while minimizing your investment and eliminating the hassles of managing
a major asset that is idle most of the year.
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