| Fractional real estate,
wherein an investor purchases a share of a fully furnished apartment, town
house or detached house, has been a major hit at recreational resorts since
the concept was introduced in the early 2000’s.
The main attractions for
buyers are price, a share in potential appreciation, and convenience.
Fractional real estate provides
both a legal and use structure that makes sharing a property easy. For
example in a quarter ownership, there are four owners. Each owner would
get his or her own title just for his or her legal quarter interest. They
can put a mortgage on it, pay their mortgage off,or sell without having
to deal with other owners.
There are a number of different
programs, but the bottom line is that there is a plan so that each of the
owners has absolute certainty about when they can use the home.
A third-party manager is
employed to maintain the property, and all the owners contribute equally
to the cost of maintenance, management, a fund for future replacement of
furnishings and normalrepairs. In some cases, exchanges can be made at
other resort locations.
For many buyers, fractional
real estate is their only option if they want to buy into an expensive
market. For instance, for $250,000 a buyer could own a quarter ownership
of a three-bedroom luxury townhouse at Whistler, one of Canada's top ski
resorts, which would be worth well over $1 million for full ownership.
Usage arrangements vary between projects, from straight forward to extremely
innovative.
Generally, if you own one
quarter of a property you get to use it every fourth week. Each ¼
Share gives the owner 13 weeks of use per year. The calendar works on a
rotating basis so the major holidays areexperienced by each ¼ Share
owner every fourth year. If you want two or three weeks together you could
see if one of the other owners wants to trade weeks. Usage for the rest
of the year is basedon a rotating selection process. See attached calendar
as an example |
