What is the Best Fractional Real Estate Deal?

For those wonderfully enlightened few who actually understand Fractional ownership and the benefits offered, this ones for you. Straight and to the point with no filler.

(If you need to understand the beautiful basics of fractional real estate see my other article "No Virginia, Fractional Ownership is Not Timeshare").

In a nutshell.... the best Fractional real estate deal is the one that makes the most sense for you. Nothing will suit everyone.

Some of the questions that need answering prior to rushing off to the fractional marketplace are the following;

What are you looking for in Fractional? (Do you like Skiing, sun, sand, beaches, day spas?)

What is your budget? (Are there payment terms? Financing?)

What is the resale market like? (If you need to sell for any reason)

Will you travel frequently to the resort? (How large of a fraction do you need?)

How much will Airfare/travel costs be each stay? (eg; Florida locations have more airfare sales than Guatemala)

What are the monthly costs? (Maintenance fees, club dues etc.)

Do you need to receive rental income when you are not at your property to offset fees?

How many weeks does each fraction represent?

Are there any additional fees? (Get it in writing)

Can you smoke in the Units?

What about Pets?

Is the purchase actual ownership, or just a "mini title"?

Are there additional fees for resort activities? (Golf, skiing, dayspa etc)

How are the weeks allocated? (Each ownership typically translates into weeks, how are they distributed?)

For example I had a client who did not have a very flexible schedule and his budget was tight. When he did get free time generally he would receive 3 weeks in a row. That meant he needed a plan flexible enough to get those 3 weeks consecutively. Most fractional plans on a rolling calendar are unable to accommodate this unless a larger share such as a 1/4 or 1/2 ownership is purchased.

That is when "stacking and racking" comes into play. If the "racking" option is available the weeks can be taken consecutively. Obviously this would be subject to availability and I wouldn't recommend calling your group a week before the Olympics demanding a double room for 3 weeks in a row. You might be disappointed.

Stacking is the ability to actually use several condos or villas instead of 1 villa for several weeks. So for example you hold a large family reunion or business function over the space of a week. But you secure 3 villas which counts as 3 weeks. This is obviously a great plus if you have a large family, or travel less frequently but maybe have a big group.

Do you want something close to home? Some people prefer to use the fractional like a "cottage" and drive up when time allows. Others prefer the jet set lifestyle and prefer the exotic destinations.

Another feature which in my opinion makes or breaks a fractional offer, is the ability to enter into an owners network. This opens up entire new worlds as all owners in the network are able to "swap and share" their locations amongst each other. Most destinations within popular owners networks are upscale, and offer virtually any location or activity you can think of. So if you purchased that Golf Villa in Florida but wanted to do some skiing as well you would be able to.

Price is obviously a consideration, however value is more important. Make sure the purchase fits around your lifestyle rather than the reverse. If you end up with a fractional you never use, then the purchase becomes a straight investment rather than a lifestyle choice. If this may end up being a possibility make sure you are aware of the going rental and vacancy rates to justify the ROI. Typically a Fractional purchase should not be your first choice for a straight investment (depending on location and appreciation) however it should tie-in as a fun lifestyle choice with decent ROI, or a way to offset high vacation costs.

Most fractional groups will handle the rentals of the unit and will keep a portion of the rent for administration etc. Make sure you are aware of what that split is as well.

Robert P Edwards is a Global Property marketing specialist and is currently involved in the fractional real estate industry with Resort Owners Group in Toronto. His website can be found at http://www.Seagus.com or contacted at rob@seagus.com

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