14 Feb Isn’t This Just Timeshare?
What is Fractional Ownership, and how does it differ from Timeshare?
A great question that deserves a great answer! Yes, it is true that when people hear the word “timeshare” the hairs on the back of their necks tend to stand up a little, and perhaps they wish they could run to the proverbial hills; however after reading this, I am sure those apprehensions will be somewhat alleviated.
So, What is the difference between a timeshare and fractional ownership?
Here is where the division begins. One school of thought seems to suggest that because timesharing conjures up some negative connotations, we need to make a break and be sure we tell people emphatically that “No, this is not a timeshare”. Timeshares are a lot different than fractional. While this may be the case, they do share some commonalities.
- Firstly, they both provide luxury vacations for you and your family all over the world. As the old adage goes: “It is your vacation home with wings.” Meaning you can use your time at thousands of resorts all around the world through exchange companies such as RCI, (Resorts Condominiums International), and II, (Interval International).
- Secondly, you can use can stay at your home resort and use it as your yearly vacation home if you so choose. (For a fraction of the cost of a vacation home).
- Thirdly, you can also gift it to family members and really spread the joy around.
- Fourthly, they can also leave a great family legacy of vacation memories for years to come. What a great feeling when you are on vacation remembering what your parents or grandparents did for you by leaving you an affordable luxury vacation. Those family memories are shared year after year in many different locations.
The problem with Timeshare, and why it is such a negative term is that in the early years of marketing, over exuberant salespeople sold it as an investment. While it is an investment in your families growth and togetherness, it is not a financial investment. Many people were sold on the idea that they could use it for 10, 20, 30 years or more, and then turn around and sell it whereby making a profit. That just simply isn’t true. The fact is, it is an investment. An investment into the quality of holiday time spent with your families and loved ones. I am not sure if it is such a bad thing to be forced to take a nice vacation every year with your family. I believe that is the intention and purpose for a Timeshare. You pre-pay your vacations for the rest of your life (providing you have a perpetual share), and then pass that legacy on to your family to enjoy with their families, and so on. Because you have pre-paid your holidays, you are more likely to take them, and not procrastinate. Vacations are those times when priceless memories are created, so if you own a timeshare, good for you, enjoy what it is, and not what it isn’t.
OK, stop dodging the question, what is Fractional ownership?
Here is the simplest definition I could come up with. Fractional ownership is the Shared ownership of lifestyle assets.
There are many stories and myths floating around cyberspace as to the origins of fractional ownership, but it is widely agreed that the fractional market began to form in North America in the early 1990’s with groups of friends coming together to purchase vacation properties. While your traditional vacation home is left unprotected and vacant for most of the year, shared ownership allows the property to be managed and occupied all year with usage and costs being split among the owners of that property. Those early seeds were watered and cared for and grew into the industry we now know as Fractional ownership. It’s popularity has grown so much so that a recent study performed by Price Waterhouse Coopers found that one sixth of households that could afford fractional ownership would consider investing in the near future.
Fractional ownership has grown so much in popularity in recent years that it is no longer identified solely with vacation homes, but has expanded into such markets as: jet airplanes, yachts, exotic cars, trains, helicopters, racehorse ownership, and now even designer accessories such as purses. That’s right, you heard me, purses. So now, instead of having to buy the Prada Red Leather Hobo, ‘cause you have to match those new shoes, or I have to have that Louis Vuitton Holdall for a quick business trip somewhere,etc. Before you know it you are left with a pile of purses in your closet that you have only used once. Now you can take advantage of shared ownership in those areas as well. Simply paying a monthly fee allows you to browse through the catalogue and select what you need for that particular occasion without the huge price tag of buying it. So the next time you are dreaming about owning a candy apple red Ferrari, like Magnum P.I., think fractional, or shared lifestyle assets.
Obviously I am not trying to sell you a luxury car, or a purse of any sorts (wouldn’t even know what to suggest), but I am simply making the point for shared ownership. Shared ownership is not only the now, but it is also the future.
Next time you start dreaming about owning that luxury vacation home, think fractional, where your dreams become reality. The time is now to embrace your future by taking advantage of that luxury vacation you have always dreamed of through shared ownership.
I know I have evaded the issue of Timeshare vs. fractional, but alas, here is the main difference:
It all comes down to dollars and sense. Saving dollars makes sense!
Let’s say the average week of timeshare is $20,000. That is still not bad for a lifetime of vacations. However, if you have 52 weeks in the year, which we do most years, then you would be selling that vacation home for 1.4 million dollars, in which case your resort would have to unrealistically appreciate in order to get your investment back if you ever sold it. However, the purpose of a timeshare is not to use it for 30 years, then sell it and hope to get your money back. We all know that doesn’t happen. The purpose of a timeshare is strictly to vacation with. It is still more affordable than a similar vacation if you were to rent.
Let’s do that same comparison with Fractional ownership.
With only 4 to 8 owners per unit, (with the most popular fractions being eighth and quarter ownerships), the math makes way more sense. Let’s say you sold your fractional interests between $50,000 – $125,000, depending on unit size and rotation. The whole unit would then be worth beween $400 000 and $500 000 giving it real value. Most fractional properties are appraised by real estate appraisers, and as a result follows the whole ownership market quite closely. When the real estate market dips, the fractional market dips. When the market rises so does the fractional ownership market. If your shared vacation home is worth 500 000 dollars today, and it follows the whole ownership market, then it should be worth more ten years down the road. In fact most efficiency experts say it takes around seven years to make money in the fractional ownership market. So as you can see it is really all about dollars and sense.
Another added advantage is you can take advantage of the resorts rental program where you control how many of your weeks you want rented out, and the resort takes care of the rest. This is a great option for offsetting some your strata and maintenance costs. Even if you couldn’t use it at all one year, then you could rent all your weeks, and not worry about the headache of managing your vacation property.
The other great flexibility offered is the exchange option which comes into play when you start planning your retirement trip, or your honeymoon, or taking that luxury vacation you always dreamed of. Our exchange experts can help you with the planning as well. So now that we have cleared the air, I think it is time to investigate your options.
Don’t wait, do it now! You have worked hard all your life! You deserve it!
As a result of the current real estate market, your timing has never been better to take advantage of fractional real estate. Give me (John Seeland) a call at Sunrise Ridge Waterfront Resort, and let’s turn those luxury vacation dreams into reality!
1-866-812-3224 or email@example.com