Fractional ownership is rapidly growing as an alternative to full ownership
of vacation homes. Fractional or co-ownership homes are not a new concept.
Vacation homebuyers have, for decades, split ownership and use of second
homes to defray costs for vacation properties that are often used
infrequently. Historically, the one-quarter fractional has been the time
tested resort product and has sold successfully for many years to unrelated
parties. In these developments, however, services, project amenities, and
management are often minimal, particularly at the lower and mid-range market.

Within the last few years, a new and refined variation of the fractional
vacation home has emerged. It is rapidly evolving with accelerated interest
from the market. The new fractional product is an upscale luxury home that
incorporates amenities which appeal to the affluent buyer at the highest end
of the household income scale. There are also new mid-priced fractional
products being developed that are designed and priced to appeal to upper-
income households.

High disposable income is associated with more leisure time and a preference
for luxurious surroundings. In response to a desire for more use of an
upscale vacation property than is offered by a timeshare, but without the
cost and responsibilities of a wholly-owned second home, fractional interest
in luxury condominiums are experiencing strong untapped demand.

Unlike a timeshare, which is basically a long term lease that decreases in
value each year, fractional co-ownership provides the investor with a form
of title to the property. The fractional investment may be held, passed on
to family members, or sold. As with any piece of real estate, the investor
has the opportunity for equity appreciation if the value of the property
rises, as has been the case in the Mayan Riviera the last few years (30%+
annually)

The vast majority of recently completed fractional projects are located in
the Rocky Mountain ski areas, resort destinations in the USA, the Caribbean,
and Mexico. In addition to ski resorts, these destinations include golf and
beach resorts. Fractional co-ownership works best where the real estate
prices are very high.

The luxury fractional buyer can afford a wholly owned vacation home, but may
have difficulty justifying the investment due to infrequent use, The
fractional buyer wants extensive amenities (beach club, golf, barbeque area
with roof top ocean view terraces, luxury pool, Jacuzzi, laundry, parking,
and storage lockers) and hotel services (maid service, concierge, on site
management and maintenance, security) that are usually not available with
wholly owned homes or condos(Royal Oasis being the exception).
The fractional buyer is a repeat visitor to the resort area in which the
property is located, often visiting more than once a year.


It is essential that the investor understands that they are investing
in real estate, not vacation time like a time share, and receive all the
benefits of real estate ownership including rental income when they are not
enjoying any part of their fraction.

By Chris Boehm (Royal Oasis Suites)