Comparison
of Whole Ownership to Fractional Ownership
People interested in purchasing a
vacation home no longer have to go the traditional
route. Now many options exist, including shared or
fractional ownership that costs less, includes numerous
amenities and doesn't involve the hassles of home
maintenance. Here's a comparison of whole ownership
versus fractional ownership:
Whole Ownership
- The appeal:
Whole ownership is what people are most familiar
with. After all, it's how they bought their primary
home and probably how their parents did as well.
- Value:
Since real estate has traditionally appreciated
over time, purchasing a vacation home can be justified
as not only recreational expense but also as an
investment.
- Who's buying: Lots of middle-income
baby boomers who want to spend frequent weekends
or all summer with their families in a particular
spot. The average buyer is 47 years old with annual
income of about $80,000.
- Current market:
Demand for second homes is booming after an economy-induced
slowdown during recent years. Buyers last year snapped
up an estimated 445,000 second homes, far eclipsing
the previous high of 377,000 in 1999, according
to the National Association of Realtors.
- What you get:
Full ownership of a home, and all the inherent perks
and hassles: You don't have to share your property
and you can go anytime you want, but you do have
to deal with all the leaks and tax bills.
- Locations:
On average, a second home used for vacation tends
to be about 185 miles from an owner's primary residence.
Locations typically relate to some sort of recreational
preference - beach, golf, ski slope or theme park.
- Price:
Average prices for a second home are estimated at
between $190,000 and $200,000, according to the
National Association of Realtors. The hottest markets
are pricier, of course. Median prices in Aspen and
Palm Beach, Fla., are north of $1 million according
to EscapeHomes.com. In Kiawah Island, S.C., prices
are nearly $800,000.
- Resale:
Because demand is strong and supply constrained,
second-home prices have been moving up faster than
prices for primary residences, particularly in traditional
vacation markets.
Fractional Ownership
- The appeal:
Fractional ownership essentially lowers the cost
of access: Why buy a mountainside villa in Aspen
for $3 million that you use just a few weeks a year,
when for about $500,000 you can own a piece of similar
property? Fractionals allow your costs to more closely
correspond to your actual usage of the home.
- Value:
Fractionals are not timeshares, which have a fairly
sordid reputation since buyers have sometimes faced
big losses when selling or been unable to resell
at all. By contrast, fractional resale prices so
far have tracked local real-estate prices more closely.
That's because they are located in sought-after
communities where demand remains high, and it can
cost millions of dollars to buy a similar property
via whole ownership.
- Who's buying:
People who want the cachet of a second home with
luxury amenities and services, and who don't want
the expense and hassle of full ownership.
- What you get:
Essentially, you own a slice of a particular piece
of real estate, giving access to a home for anywhere
from one month to 13 weeks annually. The weeks you
use the home can vary from year to year. The properties
tend to be two- and three-bedroom condos, though
the Ritz-Carlton Club in Jupiter, Fla., includes
four-bedroom homes. A few select properties offer
studios.
- Bonus:
Like timeshares of old, fractionals often let owners
exchange time at their resort for time at another
property located in a different destination. These
properties are always of comparable quality to the
one owned.
- Locations: Most fractionals
are found in exclusive U.S. markets where whole
ownership is so costly as to be prohibitive for
most buyers. Examples are Aspen, Colorado; St. Thomas,
Virgin Islands; and Jackson Hole, Wyoming.
- Price:
Prices range from $58,500 for a studio at the Marriott
Grand Residence in Lake Tahoe, Nevada, to more than
$1.5 million at a new development Starwood Hotels
& Resorts Worldwide, Inc. is building in Aspen.
The average price is in the $300,000 to $500,000
range. Owners pay annual fees ranging from $450
to nearly $14,000 that include all maintenance,
taxes, housekeeping and services.
- Resale:
The resale market is nascent. Because these fractionals
are more like upscale real estate than timeshares,
their value tends to move with local real estate.
A survey by Ragatz Associates, a resort-industry
consulting firm, suggests that resales are getting
10% to 30% more than the original price.
Interested in pursuing fractional
ownership? Want to know what's available?
Contact Condo Hotel Center today at info@CondoHotelCenter.com
or (305) 944-3090.
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