Generally speaking, these properties do very well upon resale. Part of their value is that the demand is currently far greater than the supply. However, more importantly, the whole concept of fractionals and the success of fractionals revolve around their exclusive location. These developments are built in some of the finest, most expensive, quickly-appreciating locations in the U.S.
Home values have been escalating so much in these locations that it might cost a buyer $3,000,000 for a typical vacation home that he may only have time to use only one month or so out of the year. This is a lot of money for a vacation home that could sit vacant 11/12th of the year. All the while, he must also still pay for 100% of its upkeep, taxes and insurance. And if he wants to find renters for those open months, he must deal with all the headaches of being a landlord.
Now, if that same unit was sold as a 1/8th fractional for $500,000, the buyer in my scenario still gets the use of his unit when he wants it; he has somebody else maintain it and rent it for him; seven others to share in its upkeep, taxes and insurance; and he can still participate in the appreciation of his real estate when he sells. Best of all, he will be catered to and treated like royalty when he uses his unit, much more so than with your typical high-end timeshare or hotel.
From the developer's point of view, he just took a $3 million home, broke it up into eight sales and received $4 million instead of $3 million. Everybody's happy!
I am not finding that people are wary of fractionals. Fractionals are, in fact, better known and more popular than condo hotels. They are primarily built in the western part of the U.S. where the concept originated. Only about 1% of all fractionals that have been built in the U.S. are in Florida.
Conversely, most of the condo hotels that exist today are in Florida, and the condo hotel concept is just now gaining more recognition in other parts of the country. In fact, in just the last few weeks we have had developers call us from New York, Louisiana, California, Nevada, Honduras and Costa Rica among other places to ask our advice in building their first condo hotel.
There is no difference between fractionals, fractional ownership and private residence clubs. They are all names for the exact same thing, used interchangeably.
The above question(s) were submitted via e-mail by a visitor to www.condohotelcenter.com. The answer was prepared by Joel Greene, a licensed real estate broker with Condo Hotel Center which specializes in the sale of condo hotel units and fractional ownerships in private residence clubs.