Are Big Homes a Bygone Era, or an Investment Opportunity?
The trend of first-time homeowners buying large, luxury houses in the 1990s and early 2000s has gone by the wayside. Instead, more first-time homeowners are looking for smaller houses while maximizing their living space. Likewise, many homeowners of large houses are selling them off to downsize, leading to the growing problem of too many big houses on the market and not enough buyers.
Yet, everyone likes to have a luxury vacation spot, and timeshares are often troublesome and never appreciate. Timeshares can work for some people, read my article on the Hyatt Residence Club for information on how. However, the maintenance fees alone can eventually cost the owner more than what the unit is worth, making re-sale difficult, if not impossible. Plus with timeshares, there’s not always a guarantee that you’ll get the same unit on a site every time. A luxury second home is an opportunity to own a magnificent space for a fraction of the cost and use the house for vacations and getaways in conjunction with a few other like-minded people.
The benefits of a luxury fractional home
Luxury fractional ownership is an excellent opportunity to invest in and own a portion of a luxury home at a fraction of the cost to buy that home. Fractional ownership allows you to divide the property into ownership shares. Sometimes this is done with a few individuals, but mostly it is done through a property management company. Each owner contributes to maintenance and upkeep costs, which is proportional to their ownership shares.
For example, if you wanted to purchase the use of a luxury home for about 60 days per year, you would be a 1/6 owner of the property. You would contribute 1/6 of the maintenance and upkeep costs, and 1/6 of the purchase price of the home.
An additional benefit to owning a luxury fractional property instead of a timeshare is that you are an owner in the property. This means that as real estate values in the area increase, your share in the home increases as well. Any capital gains made in the sale of the home at the end of the LLC’s term will go directly to the shareholders, along with their original contribution. The potential to make a profit on a second home investment is an appealing benefit for many second-home buyers.
Mortgage brokers are also less likely to issue mortgages for timeshares because they’re considered to be high-risk. A luxury property home, on the other hand, is considered to be a quality asset investment by most mortgage companies, and it may be easier to achieve a loan for this purpose.
When you’re working with a luxury home property management group like Lifestyle Asset Group, you can schedule your time at your home through an easy-to-use reservation system.
Unlike timesharing where you’re competing with at least 25 other owners, and sometimes 51 owners, you are only coordinating your schedule with 5 to 11 other property owners. This allows you to schedule, on average, up to 5 weeks of vacation time in the home, as opposed to a week or two through a timeshare. Some homes even allow up to 8 weeks, depending on the number of owners invested in the fractional. The most popular fractional ownership size is 1/4, giving owners 12 weeks of usage.
If you’d like to visit another area, you can exchange the time at your luxury home with other luxury homes around the world in the Elite Alliance travel club. The flexibility of being able to move around when you want, coupled with the security of owning time at your second home, offers both peace of mind and new opportunities for adventure.
How luxury fractional homeownership works
Lifestyle Asset Group holds the home in partner owned LLCs. Those LLCs have contractual terms with a pre-determined length of ownership and property sale date. This is usually between 8 years from the original purchase, with the average for most fractionals being around 8 years. The reason for this period is that most people begin to look around for a different second home in 7 years, or they are ready to move on from their second home.
The luxury fractional home is sold at the current market value, and if there are any capital gains made from the original purchase price, the profit is split between the shareholders. If improvements or upgrades were made to the home during the 7 years, this may also increase the market value of the home.
For many who are wary of timeshares, it’s often due to a lack of exit strategy laid out ahead of time. Sometimes selling a timeshare can take years, and you never really recover your original investment because they rarely increase in their value. Luxury homes and shares sell much more quickly, especially by fractional multi-tiered solution buyers like the Lifestyle Asset Group and their clients.
When it comes time to sell, it is courtesy to offer the current owners your share first, as they may want to increase their time. If the other owners do not want to purchase your share, your portion of the deed will be placed for sale at market price.
If you would like to rent out your home during your weeks, the Lifestyle Asset Group can coordinate that with you and handle the rental arrangements.
Own a luxury home for a fraction of the cost
Whereas timeshares usually offer one- or two-bedroom units with small kitchens, limited laundry, and smaller spaces overall, owning your own luxury house gives you the entirety of that house for you and your family. Luxury homes usually offer large indoor and outdoor spaces, with 3 to 5 bedrooms on average for your family and friends.
Fractional resort properties also tend to have better furnishings, construction, and locations within the resort.
Qualifying for luxury fractional homeownership
To qualify for fractional ownership of a luxury home, you must provide proof of yearly income of $150,000 or more. If you need a loan or mortgage assistance, you must go through the bank’s qualification standards, including credit checks and other criteria. A good credit score will ensure you qualify. Qualifying for a loan or mortgage for a vacation home will require an above average score similar to applying for a top tier travel credit card such as the Marriott Bonvoy Card.
An investment opportunity
If you’re looking for an exciting investment opportunity in a luxury second home for you and your loved ones, look no further than luxury fractional homeownership. You’ll enjoy the freedom and security of being part of an elite group of homeowners who enjoy beautiful vacation homes with plenty of flexibility for your lifestyle.