Fractional Ownership on the Rise

It's "fractional ownership." Or "interval ownership." Or a "private residence club." Or even simply, a "vacation club."

Call it what you will, the concept of purchasing a share of a luxury vacation residence-in beach resorts, golf communities and upscale mountain towns throughout the United States and in foreign countries-has exploded in recent years, and shows no signs of slowing down.

According to the 2006 Fractional Interest Leisure Real Estate Market Report, total sales volume in the overall fractional interest industry in North America 2005 was a whopping $2 billion.

These sales mark an increase of 27 percent from 2004 and 283 percent from 2003.

It's no wonder the fractional ownership is growing by leaps and bounds. It's a chance to own a slice of real estate in high-end vacation communities for a fraction of the price.

Instead of plunking down $1 million to upwards of $10 million for a vacation home in the glorious Rocky Mountains or prime oceanfront real estate on the California coast, buyers spend closer to $200,000 to $500,000 (or sometimes more, depending on the fractional arrangement and how ultra-luxe the property is) for the use of two- or three-bedroom furnished condominium-type unit.

Fractional amenities galore

In typical, high-end fractional-ownership communities, owners have access to upscale amenities like swimming pools, fitness centers, tennis courts and kids' activities. At the most high-end fractional ownership residences, such as those developed by such upscale hoteliers as Grand Hyatt, Ritz-Carlton and St. Regis, concierges are available to wait on owners hand and foot-even before vacationers arrive, with pre-arrival grocery stocking. Owners can store personal belongings-resort wear and personal photos-on site, and the concierge will decorate your condo before you arrive, as well.

Vacation ownership takes the hassle out of second-home ownership. You don't have to deal with maintaining or renting out your second home: courtesy of the annual membership fees, all the maintenance of your home away from home-basic upkeep, lawnwork, etc.-is taken care of for you.

And in the case of fractional ownership, you are a bona-fide owner-you have a deeded interest in a piece of real estate. You can sell it, put it in a trust, will it to descendents.

Some "vacation clubs" or "destination clubs," often grouped together under the fractional-ownership category, are structured more like a membership, not a deeded piece of real estate. The "Understanding Vacation Ownership" brochure from the American Resort Development Association (www.arda.org) includes a glossary of terms that helps explain all the different kinds of modern-day timeshares.

Most significantly, old-fashioned timeshare arrangements required owners to visit their property during "fixed weeks" in the year. For example, every year, in Week 3 (or the third week in January) you would be able to stay in your two-bedroom condo in, say, Naples, Florida.

Today's fractional-ownership arrangements are typically made with floating weeks-say, you are guaranteed a two-bedroom residence in the complex for two weeks in the winter and two weeks in the summer, with specific weeks on a first-come, first-served basis. Other "floating weeks" are also available on a first-come, first-served basis.

Luxury fractional real estate

While fractional ownership opportunities are available for well under $500,000 throughout the United States, Aspen real estate prices are pushing the luxury interval-ownership envelope.

At The Little Nell in Aspen, Colorado, ski-in, ski-out, three- or four-bedroom residences at this ultra-luxe hotel are selling for more than $1 million each. More than half of the fractional shares of 26 residences are sold out. But there are still some 1/8 interests left. Ownership guarantees a minimum of four "planned vacation weeks" each year: two in prime winter, and two in prime summer.

Considering fractional ownership? Download "Understanding Vacation Ownership" from the American Resort Development Association's website: www.arda.org.

Sources:

2006 Fractional Interest Leisure Real Estate Market Report:
(http://www.arda.org/AM/Template.cfm?Section=Pub29&Template=/CM/ContentDisplay.cfm&ContentID=5805)

Understanding Vacation Ownership:
(http://www.arda.org/AM/Template.cfm?Section=Understanding_Vacation_Ownership&Template=/CM/ContentDisplay.cfm&ContentID=5917)

Residences at Little Nell:
(http://www.rlnaspen.com/media/RLNsalessuccess4_5_06.pdf)