What Is Fractional Ownership?

by Jill Schoff

Do you like the idea of owning a vacation home in your favorite location, but don’t want the burden and cost of repairs and upkeep? Do you love the services of a luxury hotel but dislike living out of your suitcase? You’re not alone. A new breed of vacation home ownership, called “fractional ownership,” is becoming increasingly popular with busy professionals looking to maximize their family vacation time.

Fractional resorts are real estate developments in prime resort locations on the golf course, ski slope or ocean. They provide the amenities of a luxury home, such as granite kitchen countertops, whirlpool baths and roomy closets — combined with the benefits of a first-class hotel, such as concierge, housekeeping and grocery shopping services. Depending upon the design of the property, residences may be hotel suites, cabins, townhouses or detached homes.

Owners purchase a deeded share in a residence (usually 1/4 to 1/13) that gives them a certain number of weeks per year at the property and use of all amenities. By only paying for the time you use, fractional ownership can be a much more cost-effective way to stay in desirable locations such as Vail, Colo., or Pinehurst, N.C. Prices range widely from $40,000 to more than $1 million, depending on the location, number of weeks, number of bedrooms and level of luxury.

Fractional ownership properties are often called “Private Residence Clubs” and they can now be found at some of the most exclusive resorts in the world — the St. Regis, Ritz-Carlton, and Fairmont hotels all have fractional residence club programs.

Fractional, But Not Timeshare

Luxury fractionals differ greatly from the old-style timeshares. The primary differences are that fractionals offer:

• Deeded property, with the same rights as any other real estate purchase

• Greater chance of property appreciation

• A longer amount of time on property (from 4-13 weeks)

• A luxury level of furnishings, services and amenities

Of course, all of the above perks add up to another major difference: price. The cost of fractional property is quite a bit higher than that of a typical timeshare, though still much less expensive than whole ownership of a luxury home in the same location.

Exchange Weeks and Travel the World

Trading weeks is a great concept from the timeshare days that hasn’t been abandoned but instead greatly improved upon. With four or more weeks to enjoy, owners can choose to spend part of their time at a different property in another part of the country — or the world.

Most fractional properties participate in an exchange program that gives owners the ability to reserve time with other properties that have a similar level of luxury and service. Don’t feel like visiting your Caribbean property in the summer? Trade it for a week in the green mountains of Vermont instead. Always wanted to see Italy? Reserve two weeks in a Tuscan villa.

Though getting the location you want isn’t always easy (planning ahead is essential), this flexibility is one of the most exciting aspects of fractional ownership.

No More Living Out of a Suitcase

In the past those who chose to vacation at resorts — because of the services and activities they provided to their family — sacrificed some comfort in a relatively cramped hotel room.

A great feature of most fractional properties is the spaciousness of the residences. With fully-equipped kitchens, large closets and lockers for year-round storage of sports equipment, you truly have all the comforts of home.

Most residences have 2-4 bedrooms and an equal number of baths, so there is plenty of room for family, friends or clients. Many owners purchase more than one fraction to gain even more space and privacy — and time.

Service Sets Fractionals Apart

Personal service is an area where fractional properties clearly outshine traditional second-home ownership. When it comes right down to it, for most people today time is their most valuable commodity. Who wants to waste it cleaning, unpacking, grocery shopping and mowing the lawn?

There are a couple of drawbacks to not owning the whole home, of course. If you have a passion for interior decorating or enjoy taking unplanned, last-minute vacations, you may be unhappy with the limits of fractional ownership. However, fractional properties are one of the fastest-growing segments of the real estate industry, so there are clearly many who find the benefits far outweigh the drawbacks.

As one owner puts it, “My vacation starts the moment I arrive. We head straight to the restaurant for a bite to eat. When we get back to our residence, our refrigerator is fully stocked, our clothes are unpacked and our ski equipment has been pulled out of storage. There’s nothing left to do but have fun.”

To learn more about Fractional Ownership and how it differs from other vacation ownership options, download Luxury Fractional Guide’s Free 47-Page Vacation Ownership Guide.

Luxury Fractional Guide Copyright © 2008


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10 Responses to “What Is Fractional Ownership?”

  1. I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

    Eric Hundin

  2. […] LFG Staff placed an observative post today on What Is Fractional Ownership?Here’s a quick excerptFractional resorts are real estate developments in prime resort locations on the golf course, ski slope or ocean. They provide the amenities of a luxury home, such as granite kitchen countertops, whirlpool baths and roomy closets … […]

  3. Paul Coghlan Says:

    please email regular updates

  4. Consider it done!

    Thanks Paul,

    LFG Staff

  5. Very interesting article. Would love to read more and will be following for sure. I’m especially curious, though, how viable an investment fractional ownership is given the current credit cruch and the downward spiral of property values in the last year. Any thoughts?

  6. Sherman Potvin Says:

    Hi Ray, Please note that frac tionals should not be sold as an “investment” they are a “lifestyle” purchase. If you want investment stick to whole ownership, cheers, Sherman

  7. Donald Peterson Says:

    How are fractional sales holding up in comparison with whole ownership sales in this challenging real estate market?

  8. Sherman Potvin Says:

    Hi Don, Of course it depends upon where you are located as it varies from state to state. In general, fractional sales are off by 41% in 2008 across the board. For many sales are vitually stopped and for others they are strong so its hard to say without knowing where you might be developing, hope this helps, cheers, Sherman

  9. Donald Peterson Says:

    Do you know which banks are offering fractional mortgages in Florida and Minnesota?

  10. Could I have a fractional purchase completed under my company name or would I be required to purchase as an individual?