If you’re thinking about investing in a timeshare, you may want to wait until you’ve researched fractional ownership. This type of investment is similar to a timeshare but instead of renting what amounts to one week a year, you buy a share in an actual home. While this type of ownership isn’t for everyone, it does have its benefits. Here are five things you need to know about fractional ownership:
The costs involved with this type of investment can be high. Most people invest between $100,000 and $500,000 for the privilege of owning a piece of a vacation home. Keep in mind, however, that the home you purchase shares in will be worth two to five times that amount. Buyers typically invest in groups of two to 15 people; each additional person added to the group lowers the cost paid by the individual members.
The advantages to fractional home ownership are many. As an investor, you can choose to stay in your property for weeks or months at your discretion. The homes are often maintained by a third party and the amenities are plentiful. This type of investment gives you an easy way to own a piece of vacation property without the tremendous responsibility of solely owning a second home.
Who Benefits Most
It’s no secret that you have to be fairly well-off to participate in fractional ownership. Most of the homes are million-dollar models in luxurious locations although as this form of vacation home ownership becomes more popular expect developments in lower price bands to start appearing. This type of investment is typically the most sound for couples and retirees who are members of the upper-middle class. Unless you have $100,000 cash in your account to invest, keep in mind that you will be making what amounts to a second mortgage payment each month.
Fractional Ownership versus Timeshare
Some vacationers prefer fractional home ownership over timeshares, simply because the level of care that the different investors show their homes. A timeshare can have more than 50 investors, none with a vested interest in their home. Fractional properties are typically maintained by five-star management companies, while timeshare properties are lucky to be managed by three-star companies. If you’re looking for comfort and luxury, fractional ownership is always the way to go.
Is it Worth the Cost?
You may be asking yourself if fractional ownership is worth the cost. Unfortunately, the answer to that question is not an easy one and much will depend on how you paid for your fractional home in the first place. Owning a share in a fractional property will not often save you money when compared to renting a room in a resort for a week or two, but what you’re really paying for is convenience, excellent service and your own home. For those who invest in fractional properties, having a home-away-from-home is always worth the cost.
Fractional ownership is not for everyone. You must be financially well-off, love to travel and be willing to visit the same location every year. If you are the type of traveler that wants to experience a different part of the world each holiday, fractional ownership may not be a wise investment.
This article was written by Georgina Clatworthy who blogs about real estate finance and investment, and is a contributing writer for the Ritz Carlton Club. Home Club Members also have access to The Ritz-Carlton Experience Collection, which includes more than 70 hotels worldwide.