Fractional Property Sales
However, the key difference is that the fractional purchaser owns part of the title (as opposed to only purchasing units of “time”). The title or deed is legally divided into percentage shares or fractions which can then be purchased and owned by more than one individual or company.
Shared ownership of the property and its deed usually also entitles fractional owners to certain ‘exclusive member privileges’; preferential booking of weeks, concierge services. Fractional shares in a property usually range from 1/2 (26 weeks usage & 50% title) to 1/16th (3 weeks usage & 6.25% title) and as a general guide the more expensive the fractional property, the less amount of shares available.
Whether owners have access for 3 weeks or 6 months a year, the key benefit is they only purchase fractional shares of the property for the time they intend to use and any service / operational costs necessary at the property are shared between owners.
Private Residence Clubs
Private Residence Clubs (PRC’s) have taken the hassle out of vacation home ownership and provided an attractive alternative to wholly-owned second homes at a fraction of the cost. These properties are frequently found in the USA, Canada and Mexico, and are rapidly gaining in popularity in Europe and the Far East.
Not to be confused with a timeshare or a typical vacation ownership plan, which is basically a renewable vacation, a Private Residence Club is a real estate investment with flexibility of use that models single-home ownership. With Private Residence Clubs, the buyer has an expectation of value and price appreciation.
Membership functions like that of a private equity golf and country club. The level of social interaction and pattern of use can be chosen to best fit the needs of the individual members. Amenities abound, with recreational, dining and shopping options that rival five-star resorts. And comparable to joint ownership of jet aircraft, the maintenance costs and use of an expensive asset is shared.
For example, a one-eighth share of a $2 million luxury home is purchased for $250,000. Each owner receives four weeks of guaranteed time during prime season, to be reserved six months in advance. Owners can book the weeks they want on first, second and third choice basis.
The home is guaranteed to the eight owners for a total 32 weeks. The remaining 20 weeks of the year are "open access" time when any owner can make a reservation at no additional charge. This allows owners to obtain several weeks of extra time as their individual schedules permit.
Private Residence Clubs address a previously unsatisfied need at an affordable price to an enlarged and aspiring audience set on luxury vacation home ownership. As consumer awareness increases and the fractional property industry matures, more and more buyers will be drawn to this concept by the global recession and reap the rewards and lifestyle benefits of a luxury second home without the hassles and price tags that burden sole ownership.
Globally, condo hotels also known as buy-to-let hotel room schemes, condotels and apart hotels, are a relatively new concept in luxury second home ownership and vacation living with mainstream hotel services available, including the use of facilities like state of the art fitness centres, full service spas, fine dining and concierge services geared to discerning clientele.
Typically, investors purchase a stunning suite or apartment residence in a four or five star, luxury, high rise hotel, and receive around 50% of the accrued rental revenue after sharing it with the hotel as non-resident owners. This enables them to offset and share running costs as an option in ownership programmes operated by the major hospitality hotel chains, making vacant room rental income mutually attractive. Many fractional ownership condo schemes also guarantee around 28 days personal usage per year for free.
Within the major condo hotel rental programmes, investors have deeded ownership and can usually use their suite or apartment when they desire giving the management company reasonable prior notice of their owner reservation. Condo’s within multi-national hotel chains are generally more desirable and prestigious.