Fractional Ownership is coming to the Texas Gulf Coast
What is Fractional Ownership?
Fractional Ownership is a middle ground solution to second home ownership. It is between whole ownership, with sole responsibility and full exclusive use, and time-shares, where most often, you purchase vacation time in a resort, (about two weeks) not the real estate itself. Factional Ownership consists of owning an “Undivided fractional fee-simple interest” in a specific property. In simple terms, you are buying your vacation home in partnership with other owners who share the cost with you.
Fractional vacation homes have the appeal of defraying costs by sharing them with others and making effective use of the time that you are not using the property.
How does it work?
Fractional Ownership is like any other real estate purchase, except that you are only purchasing a fraction of the property instead of the whole property. Different developments and properties have a variety of options. The fractional shares can vary from a thirteenth (1/13th) to a half share (1/2). A thirteenth share, for example, provides one week’s use of the property each season for a total of four weeks per year. If this were all that you wanted, you might want to compare the costs to a timeshare. However, more common are quarter shares, where you use the property one week out of every month, sharing the property with only three other purchasers. Under this unique form of strata title ownership, an owner has registered title to a one-quarter interest in the condominium, estate, or townhouse.
Management of the property is most often taken care of by a third party or a Homeowner’s Association. In some developments, the Homeowner’s Association leases the units from the developers, and you, as the quarter owner, sub-leases the unit back. In some cases, an annual budget is established, and owners make monthly or quarterly payments to cover utilities, insurance, taxes and the like.
One of the main reasons people buy fractional, even when they can afford the entire purchase, is that the expense and responsibility of ownership is reduced. This makes the second home truly a vacation, as you can simply go there, and know everything is in order. At the same time, you have the deed to the property, and you can pass it down through generations in your family or resell it through a broker.
Some of the fractional developments also participate in global vacation exchange clubs. This offers the ability to travel elsewhere for vacations, while still maintaining the fractional ownership of your own property.
Many of the fractional developments are in high-end resort locations, where condominium or property ownership is priced at the high end. Again, the fractional owner has access to all the amenities in the resort area, while paying less to get in.
Some Key Advantages
- Affordability. As an example, a one-fourth share in a four-bedroom oceanfront home goes for far less than you’d pay outright.
- Shared costs. Taxes, maintenance, insurance, snow removal, financing costs. The agency manages these things, so you don’t have to.
- Deeded ownership. As with all fractional, you own something that can be bought, sold, borrowed against, or transferred to your heirs.
- Business relationship. No arguing with your in-laws about whether your mounted deer trophy can go over the fireplace, or whether they paid their share of the snow-removal costs.
- Flexibility. You can sell whenever you want, or you can buy out your common tenants as time goes by. Shared ownership can be a wonderful way to get your foot in the door.
- Expanded possibilities. If you’ve got more to spend, consider owning more than one share in different homes in various places.
- You can get more than one vacation home experience for less than the price of one.