A New Way of Owning a Vacation Home – For a Select Few: Fractional ownership of vacation homes, also called private residence clubs, is a relatively new concept that allows you to enjoy four to 12 weeks of home ownership privileges per year in an exclusive luxury resort, but at a fraction of the price. total cost of ownership.
If you want to own a stunning second home complete with custom amenities and located in an expensive tourist area, but can’t justify the expense because you’ll only use it a few weeks or months out of the year, this type of real estate arrangement may appeal to you.
amenities galore
Most private residential clubs offer extensive amenities. These can include an extravagant clubhouse and spa, plus five-star hotel amenities—the kind you might not expect to have in a wholly-owned vacation home, luxury condo, or timeshare.
Picture this: You’re going on vacation and you call ahead of time with the staff at your private residence clubhouse. Upon request, staff shop for your groceries, dry clean your clothes, make your restaurant reservations, heat your private pool, and place favorite knick-knacks and pictures of your family members in your residence. A staff member will meet you at the airport and drive you home where a newly detailed Jaguar is sitting in your parking space for your use at your disposal.
Get the image? Private Residential Clubs are NOT your ordinary second home.
featured rentals
Residential or fractional clubs have sprung up in exclusive world-class tourist destinations around the world. St. Thomas, the Virgin Islands, Puerta Vallarta, and Mexico City are popular locations.
In the US, the first subdivisions were in the major western ski areas, particularly in Colorado, where real estate was so expensive that wholly owned second homes were out of the question for most people. They eventually spread to the northeastern ski areas. Since then, fractionals have started showing up in golf-oriented communities like Hilton Head Island, South Carolina, and popular beach states like Florida.
Some of the most popular fractionals can be found in Jupiter, FL; Aspen Highlands, Bachelor Gulch and Aspen Snowmass, CO; Lake Tahoe, CA; and Whistler, British Columbia. Subdivisions located in the US generally offer good access to major airports allowing for easy transportation arrangements.
Management by Five Star Companies
The key to the success of the fractionaries is their professional management. Most are operated by well-respected hospitality companies known around the world for their world-class resorts. Among them are Ritz Carlton, Four Seasons, Starwood, Intrawest and Millennium, brands known for their five-star services and amenities.
hassle free ownership
Part of the appeal of fractionals is that they are completely hassle-free. In addition to having a staff at your disposal for personalized service, in a private club residence you never have to worry about repairs, maintenance or cleaning. Everything is included in the price and annual fees and is run by the professional management company.
Appreciation potential
To date there have been very few fractionalized tourism developments. The demand is high. As a result, there is likely to be substantial appreciation, rather than the depreciation that typically occurs with timeshares.
Real estate experts say the appreciation prospects for the investment look excellent. You can expect at least parity in appreciation against other real estate in the resort area in which the fractional is located.
Prices
To purchase a fractional, you pay a one-time purchase price and then an annual maintenance fee that covers all expenses associated with owning the property and its use and services.
How much do fractionals cost? Prices vary based on the size, amenities and location of the individual property. But most are in the $100,000 to $500,000 range. Keep in mind that these are truly top of the line homes that would cost you two to five times as much if you bought them outright than wholly owned vacation homes.
Comparison of fractionals with timeshares
How do fractionals compare to timeshares? They really don’t. Fractionals are much more exclusive and include many more luxury amenities and services than timeshares. They tend to be larger houses, usually three to five bedrooms. Timeshares generally allow you to use only one or two weeks per year. Fractionals offer from two to 13 weeks, and do not necessarily have to be consecutive weeks. Choose the weeks you want.
When it comes to financing, getting a loan from a bank or a mortgage company on a timeshare is difficult. Rates are high regardless of how good your credit is. That’s because it’s a well-known fact that most timeshares depreciate over time. By contrast, banks and mortgage firms view fractional assets as appreciating and will often treat them like any other second home purchase.
Why do fractionals tend to appreciate while timeshares tend to depreciate? There are a couple of reasons. With fractionals, more of the buyer’s dollar goes toward high quality finishes and “bricks and mortar” versus construction. sales commissions that can be as high as 40%-50% with timeshares.
Additionally, timeshare values have historically been low due to the high number of resales on the market, not to mention a continual stream of new developments. The fact is that the secondary market for timeshares has never really developed.
On the contrary, there are a limited number of fractionals on the market. That number will most likely stay small because fractionals are built only in the best and most desirable locations. Therefore, demand creates supply and results in property appreciation.
Comparison of Fractional Hotels with Condos
Fractionals (private residence clubs) differ from condos in that you have a set amount of time that you can use your vacation home. Condominiums are, in fact, condominiums located inside hotels. You can use your unit whenever you want and place it on the rental program when you’re not using it. Fractionals do not offer participation in the rental program.
Fractionals tend to be larger than most hotel condo units. Most fractionals offer three to five bedrooms, while most condo units are studios, one or two bedrooms. Currently, most condos are located in Miami and other surrounding cities in South Florida. Fractionals are more prevalent on the West Coast, particularly in ski areas. However, both types of real estate are quickly gaining popularity and soon there will be more supply across the country to meet the growing demand.