What is Fractional Ownership?

Fractional ownership provides a unique way to purchase real estate. Here are the basics of fractional ownership and how it works.

Fractional Ownership

Fractional ownership is a method of purchasing real estate that involves several buyers. With this technique, you are actually buying a portion of a piece of property with several other buyers. The deed to the property is split into several different pieces with one for each individual owner. Each owner will have equal access to the property throughout the year.

Vacation Homes

Fractional ownership is commonly used in order to purchase vacation homes. Many people love the idea of purchasing a vacation home but do not want to spend the money to do it. Most people can only spend a small portion of the year at a vacation home anyway. Therefore, it is very difficult to justify making a mortgage payment for all 12 months out of the year when you are only at the house one or two months. With fractional ownership, this problem can be addressed. You go in with five or six other people and purchase a vacation home. You divide the year equally between the owners. All of the owners make their own payment for their portion of the home. They also all chip in for maintenance and repair costs along the way.

Management

Many of these vacation homes are marketed by companies that will manage the homes for you. You will have a management company that takes care of everything on the property. They will also be in charge of the master schedule for the property. Therefore, if you are a partial owner in the home, you can contact the management team and schedule which days out of the year you would like to visit the property. This provides an easy way for fractional homeowners to schedule the time in the house.

Difference from Time Shares

When most people first hear of the idea of fractional ownership, they immediately think of time shares. Although timeshares do share some similar characteristics, this is a different topic completely. With a timeshare, you typically get access to the property one to two weeks per year. With fractional ownership, you could potentially get 13 weeks or more of the year.

Another difference is in the type of property that you get with each. With a timeshare, you will typically have a one or two bedroom unit. With fractional ownership, you will mostly be dealing with larger homes with 3 to 5 bedrooms.

Fractional ownership is also better from an investment standpoint as well. With fractional ownership, you are purchasing part of an asset that appreciates over time. Because of this, you can easily obtain a mortgage for this type of property. With time shares, their value decreases over time. In addition to this, it is very difficult to obtain a mortgage on a timeshare. In order to purchase one, you will typically pay much higher interest. Therefore, fractional ownership is generally a much better deal than a timeshare.

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