Fractional Real Estate Ownership

If deciding between a beachside cottage or slope side lodge for a second home is a dilemma, fractional ownership may be the right choice. Owning fractional real estate allows you to buy the piece of the real estate you can use, lowers the expenses and guilt that comes with a second home that is under utilized.

Fractional ownership is not new. Families have shared ownership of vacation homes for as long as there were second homes. But today's fractional programs are more formal and create a situation where you may never know your property's co-owners. Fractional is similar to condominium ownership, but fractional shares time and real estate space. Condominium ownership in America started slowly and took decades to mainstream, fractional will get a boost from the baby boom generation's propensity to innovate. Fractional ownership is growing, over $300 million in fractional real estate was sold in 2005, nearly a 40% increase over 2000.

Fractional is Not Timeshare - Timeshare is Not Fractional

Timeshare was the original "fractional share" where you can buy 1 week of ownership or a 52nd share. Timeshare has ballooned to a $3 trillion industry in the US in the last 20 years and is growing at a double digit pace.

Comparatively Fractional has many lower risk characteristics. It is less risky because Fractions are typically sold in ¼ share or 12 weeks a year; 1/8 share or 6 weeks; 1/10 or 1/12 or 5-4 weeks ownership, so the underlying real estate values are less diluted by sales and marketing expenses. It costs a lot to sell a single condo to 52 different buyers, and timeshare developers often expense 50% of the cost of a share to marketing. A single unit of timeshare or a 1/52 share might sell for $10,000 a week, or $520,000 for the whole property, might have a real estate value of $250,000. A ¼ share of the same condo might sell for $75,000, or $300,000 for 4 quarter shares, representing a 20% increase over the whole ownership real estate value.