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Ask the Expert Q&A Archives

 

 

Q - We are looking at a fractional ownership in Canada and my question is to do with the rental prices that we were told we could expect for the 3 months we own. They seem very high for the area (Victoria) and yet we have those figures to consider in the financial decision we need to make. How do I find out whether these figures are realistic?

Thank you.

A - First off, If your looking to purchase a fractional that will generate a return then you should not be buying. A fractional purchase should be a "lifestyle" purchase only. Having said that, some properties do appreciate in value but if you are relying on a rental return in order to afford it...then don't buy. You should be able to afford the purchase as it stands, if you should receive rental income fine and dandy but don't count on it, salespeople will do what they have to do to make a sale, good luck, cheers, Sherman

 

Q - I just sold international property in the Cayman's and want to use the proceeds to purchase a fractional ownership. Can I do so and still qualify for a 1031 transaction (Starker transaction)? Or is there something inherent about a fractional ownership purchase (with a deed) that does not allow me to qualify for a 1031 tax exemption?

A - There is nothing inherent about a fractional deeded property that would interfere with your 1031 transaction. 1031's are allowed by the IRS with fractional ownership. My question would be about the property you sold? You would have to check with your tax attorney to see if the IRS recognizes the sale of International property for any 1031 exchanges, cheers, Sherman

 

Q - I would like to understand how the rotating week system operates. What are the rules, how long in advance do you have to plan, how are the weeks attributed etc.

Thanks for your answers!

A - Unfortunately, There are no two the same. Usually, you would have to plan at least 6 months in advance except for space available now. When you purchase be sure that the sales person fully explains the use plan to you as this is one of the most important items, cheers, Sherman

 

Q - I would like to build or buy a vacation home and convert it to fractional ownership - divided into quarters - then sell the quarters. Is that possible? Do you have any information (books, links, etc.) that will explain how to do this?

thanks very much for your help.

A - I have been working on an e-book for nearly two years. This book will include everything you will need to turn a home into fractions. Even all of the sample contracts needed. If you can wait 60 days I will contact you, if not give me a call and I will help you on an hourly rate, cheers, Sherman

 

Q - I am interested in purchasing a fractional ownership with strong exchange possibility. I am focused on the Grand Regina in Cabo. We like the idea of skiing and beach trips. The Raintree Group is part of The Registry Collection that is merging with The Worlds Finest Resorts. From Registry's listed exchange properties and annual fee of $250.00 annual membership and $250.00 exchange fee I was underwhelmed with the list of available properties and dates available. Can you give me some insight as to the reality of exchanging properties? We are focused on 1 New Years week, 1 prime week and 1 value week that we don't really want but have to take as a package to get New Years week. Our preference is to use the weeks without relying on rental income that would yield a poor return and don't want to use Cabo for more than once a year. The unit is terrific but to pay a significant premium seems like a stretch? I would like your input on the project and am open to other options?

A - I'm sorry to say that since Cendant has purchased the Worlds Finest Resorts it has gone downhill. Cendant is so big it can't get out of it's own way. I have never been to the Grand Regina but understand it is a nice property. It is not surprising that you have to buy two other unwanted weeks to get the week you want. I personally would look at Intrawest. They have the very best exchange program   http://www.resort2resort.com/index.asp  Plus, they have Storied Places. If you would like I will ask them to mail you info, hope this helps, cheers, Sherman

 

Q - Do you sell? I have a 2 bedroom condo on the water in oceanside harbor, califorina. I would like to sell months/joint ownerships. Look forward in hearing back from you.

A - Yes, we can help you sell. First you must put together your fractional program, we will have a book in print within two months that will give you everything you need to accomplish this. Please let me know if you are interested, cheers, Sherman

 

Q - I am interested in knowing how fractional ownership is sold, in terms of say the grand marriots residences club. Is it like a traditional timeshare presentation 90 minutes etc. What are the difference etc? How does it work?

A - Fractionals sales are conducted just as one would normal whole ownership. There is no hard closing etc. The product should sell itself if presented properly, cheers, Sherman

 

Q - We presently have 20 condominiums on a lake in northern WI. We are thinking about going to fractional shares, but can't find any information on it. Lawyers have given us preliminary documents (beyond our condo docs). As we review them, it looks like fractional shares are timeshare and have all timeshare laws in play. Is this true in the state of WI? If not, can you refer us to a law firm that does fractional shares in WI? We would like to do 1/4 shares for 20 units, as we are a very seasonal area.

A - Your attorneys are right on -- fractionals in every state in the US comes under the timeshare laws since as to date there are no fractional laws written. However, your attorney should look to see what "number of deeds" are allowed in Wis, before you come under the timeshare laws. This is different in all states -- in VT it is 5, in Texas it is 12. This is important because it will save you time and money if you don't have to go under the T/S rules. Should you not be pleased with your attorney then please write or call and I will help you. Best of luck, Sherman

 

Q - How can one get a better idea of the actual re-sale value of fractionals? Would I be close to assume that there is a 25% marketing burden built into the price (am I hi or lo?)?

A - Over our brief history, over-all, fractionals have held their value and in fact had a small equity gain. Fractional marketing budgets are closer to 15%. Fractionals should be purchased as a "lifestyle" investment with little gain or loss in re-sale, cheers, Sherman

 

Q - I am interested in getting into the Hyatt program at Aspen (newest one). The price of the units are 4 times their prices for their other properties. I realize that aspen is very expensive but I am unsure if it is worth this kind of premium. I'm worried that there is a long way to go down if I ever want to resell it. I was thinking of buying another Hyatt resort at 25% of the price and trying to use my points there. Any advice? Am I on the right track or worried too much?  Thanks, AL

A - You're worried too much. If you can afford the Aspen property and that is where you really want to be then buy there because if you buy into one of their other less expensive programs you will never have enough points to make a trade. PLUS, I don't see Aspen real estate values dipping anytime soon, cheers, Sherman

 

Q - Are you aware of a website or service for owner resales of fractionals? I have had a ski condo fractional (1/4) in The Mountain Club listed in Kirkwood, CA for a year with no sale. I am a captive of the resort real estate office. Thanks for your help.

A - You are not alone. We here at LFG plan to be offering fractional re-sales in the very near future. There is no excuse for a developer to leave their owners high and dry. You might try listing with a local real estate agent that understands what you have. Check back with us in November 2007.

 

Q - There are quite a few fractional companies buying luxury homes in the Aspen area. I represent a developer of a 10,000sf home that would be ideal for fractioning. Do you know of a list of companies that buy existing property and then fractionalize them? Thanks.

A - To my knowledge there are a few companies out there but they mainly purchase on their own. If you will give me more detail on this home I may be able to help, price, location, age, style etc. Has the owner thought of doing the fraction himself? If so, I can help. Best of luck and will wait to hear from you, cheers, Sherman

 

Q - We're about to buy a fractional with Playa Del Sol resorts in San Jose Del Cabo with 3 sister resorts in P.V. and 1 in Cancun. We're looking at a 2 Bedroom (triple lockoff) condo for 8 weeks (4 primary + 4 award) (24 weeks with lockoffs) Perpetuity, 80 Breakaway week, golf package, W.W exchange ability with I.I and H.S.I $105,000 USD incl. closing costs and $389 X4 weeks annual maintanance (10% annual increase cap). Do you know if this is a good package? Good price? Good company? Please advise asap.

A - While I have not personally visited this resort it certainly looks nice and Mexico has risen in status over the past few years. This sounds like a good buy. However, I must say, IF your going to purchase a fractional out of the country be sure it's a "lifestyle" purchase and NOT for investment! Also, take whatever they tell you with a grain of salt.. In other words, be sure you love where your buying and not letting other things like exchange etc. sway you or you will be disappointed. One thing I know, if you "hold-out" and ask for the things YOU WANT, they will come around. Think it over carefully and enjoy yourselves, cheers, Sherman

 

Q - What would be the average condo fee (or maintenance fee) per 1/12th share of an average 2 bedroom condo excluding property taxes? Would a 1/4 share be 3 times as much? What would the average condo fee include? or not include?

A - Your question is difficult since as you know there are two hundred properties and each one different. In order for me to help you would have to be more specific. No, a 1/4 would not necessarily be 3 times more. Usually fees include every cost of operation so that the owner writes only one check. Hope this helps, cheers, Sherman

 

 

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