Fractional Ownership vs Timeshare

The main difference between fractional ownership and a timeshare is in the way actual equity is distributed. In a fractional ownership arrangement, the purchaser actual owns a piece of equity in the property. If the property goes up in value, the fractional owner's share of the pie also becomes more valuable. With a timeshare, ownership is not distributed. The owner purchases only weeks or months of enjoyment in a property, and these weeks or months do not rise and fall in value with the value of the property. The title is still owned by the principal owner.

Benefits of Fractional Ownership

Fractional ownership allows an individual to take part of a valuable asset without putting up the cash to purchase the whole asset outright. This is very similar to owning stock in a corporation. In fact, fractional ownership can apply to assets other than real estate. In the case of real estate, fractional ownership allows multiple buyers to grab part of a property title. If the property declines in value, the owner can sell the asset and write off the capital loss. If it increases, the owner can sell the share and receive capital gains.

Benefits of a Timeshare

The key benefit of a timeshare over actual ownership is responsibility toward the property. When you own a share in a property, you will have to pay taxes on the property and contribute to insurance and other fees. When you simply own a few weeks at the property, you are not connected to the property title in any way. This means you do not pay taxes on the property and do not need to purchase home owner's insurance, and the maintenance of the property is not your responsibility. Though you contribute to these expenses through your fees, you are absolved of any liability to the property as a whole.

Choosing between the Two Options for Purchase

If you are considering which option to purchase, ask yourself whether you would like the responsibility of actually owning the property. Financially, it is more beneficial to own a share of the property than simply to own a week at the property. However, with the financial benefit, come expenses and responsibility. Not every buyer is looking for this type of burden in a vacation property. If you would simply like stress-free enjoyment of the property, timeshare options may be best for you.

Choosing between the Two Options for Sale

When you are selling a property, you can either offer portions for sale through fractional ownership or just look to cover expenses by renting out the property to timeshare holders. You will need to ask yourself the ultimate goal of your sale. If you would like to reduce your liability toward maintenance and taxes on the property, fractional ownership may be the best option. However, if you are simply looking to gain assistance with the cost of ownership, you can offer units of time for sale and retain full ownership. In most cases, it is financially preferable to offer timeshares than portions of your property title.

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