Fractional Consulting International: Jaco Real Estate

FREQUENTLY ASKED QUESTIONS

Here a list of the most common question about Fractional Ownership

What is Fractional Ownership..and is it different from 'time share'?

Fractional Ownership of a home, condominium, yacht, or vacation home, while sometimes being referred to as vacation ownership should not be confused with another vacation ownership program called time share. This is a mistake. While they come from somewhat the same roots and may share some of the same characteristics, the differences are great and significant. Fractional ownership is a different product as it is the fee simple ownership of at least one month to three months, and has various configurations with on average 76% of the fractional owners having five weeks of ownership, and 43% having 13 weeks of ownership.

One major difference between fractional ownership and time share is the financial realty and true equity value one finds in fractional ownership as compared to most any time share produce. An average 2500 sq ft fractional vacation home for example may have a fair market value of $800,000 and be selling completely furnished with high end furnishings and professionally managed in a quarter share fractional plan for $1.2 million, a 50% difference. A normal time share product selling only by a week like a condominium of 1000 sq. ft. with a fair market value of $250,000 may well sell for $1,000.000 a 500% difference.

This is a major distinction because of the 45 to 55% marketing and sales cost required in time share to market and sell one week intervals to each of the 50 buyers considered necessary in order to sell out one condo by selling only one week intervals per each buyer. In a Fractional quarter share plan for example we only need 4 buyers with each fractional buyer purchasing a quarter share, or 12 weeks per each buyer. As you can see with such a greatly reduced cost on the marketing and sales side by only needing 4 buyers as apposed to 50 buyers in time share, the end buyers in fractional ownership get a much better deal in true equity, value, and re-sale value for sure. The fractional plan because of the greatly reduced cost to market and sell the product makes it possible to pass on those massive savings to the end fractional buyers, becoming a much more of a win-win scenario.

Other Differences of Fractional Ownership Include:

1. Homes and condo's come already equipped furnished with high end furnishings and appliances. .
2. Size of the fractional homes or condo units are in general much larger.
3. Preferred locations and more space, many of the homes have an acre or more of land.
4. Fee simple ownership rights, you own the fractional property with a separate title.
5. Equity values go up, being titled and owning so much more time the re-sale value goes up, unlike time share which is known for not having a solid re-sale value.
6. Flexibility of trading possibilities are enhanced again with so much more ownership time, as in a quarter share program where the owner has 3 months of ownership.
7. Fractionals are far more exclusive and include many more luxury amenities and services than timeshares. They tend to be larger homes, usually three to five bedrooms. Timeshares are typically for one to two weeks per year. Fractionals offer from two to 13 weeks, and those don't necessarily have to be consecutive weeks.
8. Financing a fractional with a bank or mortgage company loan is easier than financing a timeshare, some times up to 70 to 80%. That's because timeshares are looked upon as assets that depreciate while fractionals are considered appreciating assets. Most lenders treat the purchase of fractionals like they would wholly-owned
9. Finally, there are a limited number of fractionals on the market, unlike timeshares which are more common. Most likely the quantity of fractionals will stay small because of the emphasis placed on building in only the very best, most highly desirable locations. The result is that demand outpaces supply, resulting in appreciation and good resale potential, neither of which timeshares can offer.

Can a fractional owner receive rental income?

Rental Income is possible when the owners are not using their fractional units themselves as they receive through the fractional rental pool 70% of the daily income. Fractional homes on average rent for $1,500.00 to $2000.00 U.S.D. per week and up, this is substantial rental pool income.

Fractional Ownership and Private Residence Clubs

Are fractionals the same thing as private residence clubs?

Fractional ownership of vacation homes, also called private residence clubs, allows you to enjoy up to three months of home ownership privileges at a top-of-the-line, luxury resort but at a fraction of the cost of whole ownership.

Who are fractionals really for?

This type of real estate arrangement is ideal if you want the benefits of owning an impressive beach side or higher end second home complete with personalized services and located in a very exclusive community or environment but can't justify the investment because of limited use. Fractional ownership is also perfect as the worlds financial conditions slow in the whole ownership markets. Fractionals offer all the advantages of a true high end vacation home and a true stress free vacation lifestyle that active people now really need to enjoy their lives. All this without the great amount of money spent on mortgages, utilities, maintenance, security, and the many other responsibilities that come with the normal second home, which on average is only used 2 to 3 months of the year, while the owners are paying all the expenses for all the entire year.

How long is a typical fractional share?

Most fractionals are between two to 13 weeks. Those don't necessarily have to be consecutive weeks. Because there are far fewer owners of each individual property than say your typical timeshare, you'll have a lot more options regarding when you can use the home.

What are some of the services I might expect from a fractional ownership or private residence club?

The private residence club offers extensive amenities, usually including a lavish clubhouse and spa, plus five-star hotel services. Depending on the individual property, you might have a luxury car at your disposal while visiting; a staff to stock your kitchen with groceries, run errands and do the housekeeping; your own private splash pool and hot tub; preferred tee times, etc. You get the picture. This is NOT your ordinary second home.

Where are fractionals located?

Fractionals or residence clubs have sprung up in exclusive, world-class resort destinations worldwide. St. Thomas, Virgin Islands, Puerta Vallarta, Costa Rica, Europe and Mexico are popular locations. In the U.S., the first fractionals were in major ski areas out west, particularly Colorado, and Lake Tahoe California. Since then fractional ownership has gained world wide acceptance and begun appearing in golf-oriented communities like Hilton Head Island, South Carolina and popular beach locations like Florida, Mexico, Costa Rica, in Europe and all around the Mediterranean Sea.

Who manages the fractionals?

Most are operated by well-respected hospitality companies known for their world-class resorts such as Ritz Carlton, Four Seasons, Marriott, or the Hyatt. These are brand names that can be trusted with sophisticated, experienced operations and a proven ability to deliver five-star service and amenities. Many smaller and in most cases more private and less expensive private ones have there own in-house professional management team or local property management companies.

How do fractionals differ from condo hotels?

Both offer luxurious accommodations and services for the person seeking a vacation home. The condo hotel, however tends to be an individual room or suite located within a major hotel. Fractionals can be condos, townhouses, or single-family homes located in an exclusive community.

Why should I buy a fractional instead of a wholly-owned second home?

Most people who buy a fractional recognize that they won't be spending more than a couple of months a year at their vacation home. With a fractional you can get the quality and level of luxury you want and only pay for the 'fraction' of time you actually plan to use the home. And you never have to be concerned with finding renters for the months you're not there. Also, keep in mind that included in the sale price and annual fees of a fractional is all your maintenance, upkeep and housekeeping. Fractionals are 100% hassle free!

Can you trade or rent out your time?

In most cases, yes, and this income because of the great amount of time you own can offset you association fees and payments if any. Most fractionals also participate in a reciprocal usage program in which you can trade weeks and locations.

Can more than one individual or family own a residence interest?

At most properties, the answer is yes. In addition, the extended family of the owner including children, grandchildren, siblings and parents can use the residence and are entitled to the membership privileges