Tuesday, November 1, 2016

Fractional vacation home ownership: Options for a second home


You may not be able to afford a home right on the beach.
But there are other ways to have "ownership" of a vacation property.
There is good news for those wanting to have a second home in a favorite vacation spot while spending only a portion of what full time owners pay. You can own a fraction of a home for a fraction of the price of full ownership. You aren't going to be there year 'round anyway, right?

Time Shares
We've all heard of vacation timeshares and some of what we have heard has not been good. When you purchase a timeshare it means that at a specific 'time' you have access to the 'share' you own in a property. It is not always the same property. You can purchase timeshare campsites, condos and vacation homes.

There are a wide variety of timeshare arrangements so listening carefully to a sales pitch and then reading all the fine print on contracts is a wise use of your time.

One of the benefits of a timeshare arrangement is the flexible ownership variation allowing you to use your shares in a range of locations and a range of times during the year. Some fractional ownership (below) arrangements include membership in a timeshare company as well.

Timeshare companies you may have heard of include Interval International and RCI.

Fractional Ownership
With a fractional ownership you actually own a fraction of a vacation home or condo. You can go to the same place for your purchased weeks. But, since you are one of several owners, there will be management of the property that frees you of the worry of full-time home ownership. You will have a deed and pay your share of property taxes.

The fractional category is coming back in a big way as the overall housing market rebounds. Fractionals are becoming the 2nd/3rd home "product of choice" for those with discretionary income and limited time.  And, for those with limited money for a second home, a fractional ownership makes perfect sense.

Seaview Condominiums were originally sold as a fractional ownership.
No Frills Fractional Ownership
One example of fractional ownership is Seaview Condominiums in Rockaway Beach Oregon. I'll call this the "no frills" ownership example. The developer built a condominium building right on the beach with private covered parking. The spacious, professional decorated condos were completely furnished down to bedding and pots and pans. The price, once completed, was approximately $30,000. For that amount owners had a rotating 5 weeks a year (1/10 ownership) in the same condo. There was also a monthly maintenance and reserve fee. The 10 owners were pooling money for replacement furniture, carpeting, etc. When your week was used, you also paid a cleaning fee.

Sometimes owners would be in the condo for 4th of July and sometimes owners had Thanksgiving with their families at the condo. Since there was a calendar, owners could count on the weeks they would be there. As an additional perk, the developer, and later, the condo association had a relationship with Interval International so owner's weeks could be traded for another location. While this worked well for those involved, there was no on-site management, no concierge and no organized activities.

What could not be predicted were major expenses associated with having a building right on the ocean. Windows needed to be replaced and there were problems with the roof. At times an extra assessment had to be paid by the owners.

Full Service Fractional Ownership
If you truly want to have all the services of a resort or upscale hotel during your purchased weeks, you'll want to look into being a fractional owner in a full service resort or vacation home. One example of this type of arrangement is the Fairmont Heritage Place, El Corazon de Santa Fe.

Owners spend their time in a beautiful, high-quality home, in the highly sought after downtown area of Santa Fe with great services and amenities for a percentage of what it would cost to purchase a downtown home (if there was one available).  

Homes are fully furnished including toiletries and kitchenware. Living at Fairmont Heritage Place, El Corazon de Santa Fe is a true vacation. If you want to take a day tour, they can arrange it for you. If you want a Spa treatment, they have relationships with top downtown spas where you can get your appointment. One evening we wanted to have friends in for dinner and the staff arranged for extra dinnerware. 

One couple requested that a local chef prepare dinner for them and four friends. He did! The Fairmont staff arranged the dinner. The three couples enjoyed it and while they were at the Santa Fe Opera, the staff did the dishes! With the Fairmont's concierge service, you will have all the services of a top Santa Fe resort.

Fairmont Heritage Place El Corazon de Santa Fe has a luxury,
full service fractional ownership vacation residence program.
There is ample parking with an underground garage. The property is gated.

Fractional owners receive a real estate deed conveying a one-eighth, undivided interest in a vacation home staffed by Fairmont's dedicated owner services team. Owners choose their weeks.

Fairmont Heritage Place El Corazon de Santa Fe fully stocked vacation home kitchen.

Fairmont Heritage Place, El Corazon de Santa Fe also has relationships so that traveling owners have options. Owners will have membership in the Fairmont President's Club, providing VIP recognition at the more than 100 Fairmont, Raffles and Swissotel hotels and resorts.

Purchase prices will vary. In addition, as an example, an Annual Owners Association Fee is charged.  For the calendar year 2013, this fee was $5,329.04 per one-eighth interest for the “Terra” residences and $6,898.68 per one-eighth interest for the larger “Montanas” units.  Owners are billed quarterly.

The Annual Owners Association Fee covers each fractional owners prorated portion of the annual operating expenses of the Residence Club.  These expenses include such things as taxes, daily upkeep and maintenance of the property, utilities, accounting, insurance, capital reserves, management fees, etc.  Fortunately for owners at El Corazon de Santa Fe, the management has discovered that their annual fees are the lowest on a per night basis of any of the Fairmont Heritage Place properties.

A new budget is created each year which is presented to the Association’s Board of Directors for review, changes and, eventually, approval.  It then goes to the Association’s members for a final vote and ratification.  Efforts are made to keep the assessment amounts as low as possible while maintaining the quality standards expected by their owners.

With this full-service fractional ownership comes a Daily Housekeeping Fee.  In addition to the Annual Owners Fee, a small fee is charged to each owner during their time at the property which covers the cost of daily housekeeping.  The reason that housekeeping is not included in the Annual Fee is so that those charges can be accurately assessed to those actually using the housekeeping services.  As some owners use the property more than other owners, this assures that the housekeeping fee charged is tied to actual usage and not simply divided among all owners.

Popular Choice for a Vacation Home
To avoid the worry and expense of a second home for your vacation time, fractional ownership is becoming more and more popular. Even those who can afford a luxurious second home are opting for fractional ownership just for the convenience and services.  I have provided some examples but there are many more out there to consider.

Note: Information was current as of 2013. Please see property websites for current pricing and options.