Terry Chester, an LFG client and owner of two spectacular fractional homes on Fripp Island in South Carolina (La Coeur de Terre and L’Ange de Mer) wrote the following article sharing his perspective on why fractional ownership is a great investment is the only way to own a vacation home.
People with a wholly-owned second home on the beach will tell you that there is only one smart way to own an oceanfront vacation home: DON’T. Times have changed.
Everyone seems to be tightening their collective belts. We are finally talking about the things that are critical yet were ignored as long as events would allow. It seems that choices are limited now – we are stuck with the economy, the excesses, the environment, and losses of revenue – whether from the stock market losses or lack of work production – and we are all in this big drifting arc together.
‘Green’ is back in a big way, and sustainability is the new mantra.
Even though we now must take our medicine and realign our priorities, not everyone wants to concede that the bad old days were all that bad. Maybe a little excessive, probably too extreme and definitely unsustainable, but there was some very obvious appeal: unlimited potential and growth, investments that never declined, retirement at fifty-five and family vacations in second, (and third, and fourth) vacation homes in desirable locations. All of these possibilities were very attractive if slightly delusional.
Now we are all paying the price. Yet this imposed realignment of priorities does not have to resemble puritan ethos so much as a greater awareness of our realistic place in the world. We have to be smarter now. Sustainable living, greener lifestyle, smaller carbon footprint: this philosophy is creeping into our collective psyche. It does not necessitate sacrifice – just a greater awareness.
So how do we have our green cake and make it palatable, too? There is a way:
Fractional Ownership is the only smart, sustainable, ‘Green’ way to own a second home that I know of. The alternatives are too well known: empty, ill-maintained homes gathering dust and taking up space – the ‘haunted houses’ on the beach. With fractional ownership, thirteen families can share a single home on the same footprint with generally the same usage (four weeks per year) at a fraction of the costs. As an example, a three-million dollar luxury home on the beach on Fripp Island, South Carolina, costs a fractional owner about a quarter of a million dollars. Maintenance on that home runs about six thousand dollars per year, which is about one weeks rental in a decent beach house, or about half of the insurance, one fourth of the taxes, half of the cleaning; all told, less that one tenth of sole-ownership.
Instead of spending thousands (or tens of thousands!) of dollars on a single vacation per year with Inspirato, you participate in real estate appreciation with fractional ownership.
With fractional ownership, the home is fully occupied and well maintained. Homes are not meant to sit empty and when they do, major maintenance issues naturally ensue. Conversely, if homes are used as rental property, they are generally over occupied as renters squeeze maximum usage for their dollars – another maintenance abuse that accelerates wear and tear and more replacement of equipment and furnishings.
I have built two fractional beachfront homes on Fripp Island, SC and a separate company contracts the maintenance. If a plate is chipped, a towel gets stained beyond bleaching, or a door knob becomes too corroded, they are replaced. All of the glass is cleaned weekly, golf carts and bikes are all washed and lubricated, and the yard is meticulously maintained. For any normal household, even with the most obsessive homeowner, this would be a full time job. There goes the concept of having fun at the beach. And personal clutter is nonexistent. The only items that seem to accumulate are books, videos, magazines, and microwavable popcorn. All signs that other owners exist are removed weekly. When an owner arrives, there is nothing to give the impression that the home has been used by anyone else.
Fripp Island is a sea island in the extreme southern corner of South Carolina. It is a nature preserve with free roaming deer wandering through the yards looking for handouts, alligators sunning on golf greens, and nesting sea turtles in the dunes. However, nature has noticed our presence: there is a major impact on the environment and I am sure resort developments like it will be severely limited in the future. The homes are on the ocean, a commodity that consistently goes up in value – even in the current dismal housing economy. I built our homes on existing lots where there were old, ill-maintained homes. I remodeled what I could and took down the rest. Where there was one owner and an eyesore, there is now an efficient, attractive home with thirteen owners each – they are both currently over half sold.
We can have our cake and eat it too – if we are just a little smarter about it.