Fractional Ownership Can Make Your Dream a Reality
by Dawn Bluemel Oldfield
If a ski chalet, beach house, or other vacation home seems out of reach, there’s a hot trend in vacation homes to consider that brings those dream vacation properties within reach. Called fractional ownership, it’s a form of shared ownership in which several people split the cost and expense of a second home or apartment.
According to Ann O’Blenes, Realtor, Performance Partners at RE/MAX Dallas Suburbs and Licensed Texas Attorney, “Fractional ownership is an actual “Fee Simple” deed interest as a “tenant in common” with other like-minded individuals that allows a person to own a vacation home or second home. The purpose of fractional ownership is to allow owners to own property that they could not or would not purchase on their own. It is usually reserved for high-end, expensive homes and villas in resort communities or targeted vacation cities/neighborhoods. Most sought-after vacation areas throughout the United States and abroad offer this type of ownership.”
Ann explains, “It is not a time-share. Fractional ownership began in the 1990’s with yachts and planes and has now moved to houses and condos. Some fractional ownership can be for investment purposes primarily – with the intent to generate investment income or it can primarily be for private use during the period of time an owner is entitled to use it. Most fractional shares are divided into 1/8 or 1/12 interests, but any combination can be done. Most vacation areas have corporations set up to handle this type of purchase, and an interested party can contact them directly or use a real estate agent to do the leg work. Homes with fractional interests that are already set up will be listed per individual interest by a local real estate broker. However, it may still be helpful to utilize an attorney or fractional ownership advisor to handle this in addition to a real estate agent.”
“Most people seeking fractional ownership won’t have to put together a group of like-minded individuals as the other owners. Companies that handle fractional ownership are designed to handle the legalities for the owners,” Ann says. Additionally she says, “They put potential owners with properties, but don’t broker the deals. This type of ownership typically works like this:”
• Each owner gets 6-8 weeks to use the property
• Holiday priorities rotate each year
• Other usage is based on a rotating basis
• Co-owners make up their own HOA
• They collectively set up the rules and regulations by which all owners will abide
• Maintenance is done over a 1-4 week period set aside annually per the HOA agreement
Ann adds, “Another way to handle fractional ownership is to form an LLC with a group of eight friends or business associates and put together your own legal entity and agreement whereby the LLC would purchase a vacation home, in its entirety but each owner would have a fractional interest. An attorney specializing in this could craft the proper legal vehicle. Lastly, a group of like-minded individuals (4-12 typically) could purchase property without forming a LLC, but again, best to speak to an attorney to determine which method would best protect the interests of the group.”
Ann says, “I really can’t see many downsides except you have to plan for usage and make a reservation. And, you won’t have access every year for all the holidays, as those will rotate. On the other hand, you can use it last minute if no one has it reserved at that particular time. Having someplace where you can go to make extraordinary memories is an enticing benefit fractional ownership offers, providing owners a chance to get away and enjoy their own personal idea of paradise.”
Editor’s Note: For more information on getting into the home of your dreams, you can contact Ann O’Blenes at Performance Partners, RE/MAX Dallas Suburbs at 972.898.6600
