Fractional Ownership vs. Timeshares: What You Need to Know

by Katie Hewatt on August 29, 2012

  • Sumo

(US law and generally) The legal difference between fractional ownership and timeshares can cause confusion amongst most purchasers. They are both a form of shared ownership in a property, but the likenesses end there. Before you decide on a holiday property or leisure home, you will want to familiarize yourself with the legal technicalities between a timeshare and fractional ownership. The following information may help you decide which form of ownership is right for you, and for your budget.

Timeshare Ownership

One option for making sure you have admission to your favorite travel destination is through timeshare ownership. However, before you invest your money, there are several factors to understand to make sure you are getting the most for your dollar. Timeshares are typically ownership in a property for a couple of weeks out of the year.  There are even programs available that allow you to trade your weeks with other owners, or rent weeks that are not being used instead of the peak times. Since most timeshares depreciate over time, financing is difficult to obtain. This even holds true for those with an excellent credit rating. Financing may be obtained through the offering business, but the rates may be unusually high. The resale value on a timeshare is typically low because of the large number of timeshares currently on the market, and there is a steady flow of new developments consistently being offered.

Fractional Ownership

This type of ownership can claim some similarities to a timeshare, but is a much wiser choice of investment property. Owners get a deeded title to the slice of the property that was purchased. When you are ready to move, you have something that you can sell, unlike a timeshare. Depending on the portion of the property that you’ve purchased, you can choose anywhere from 2-12 weeks of house usage. Since fractional properties are much more exclusive, this is an easier and more affordable way to own a larger and more luxurious home. Fractional properties also come with more services and luxurious amenities like you would find at exclusive hotels – such as the clubhouse, pool, concierge staff, chef, fitness center, personal training, lounge and spa. There are also fewer fractional properties on the market than timeshares because of the desirable location of the property, and the expensive nature of the home. When the demand surpasses the supply of homes on the market, most fractional owners can sell their share of the property for a lot more money than what they originally paid.

Fractional properties tend to cost more than a timeshare because the price reflects the value of a home, the amenities and services, excellent location, tax deductions and appreciation. It’s also important to hire a lawyer to review your important documents before you purchase fractional ownership in any property. They have an expert eye to help you thoroughly examine legal documents such as selling restrictions, deeds, and management agreements that pertain to the property.

There are a number of legal factors that make fractional properties a better investment over a timeshare investment property. That’s why it’s important to do your research and find a property that is going to give you the most value and reward for your money in the long run.

Katie Hewatt writes about real estate and legal subjects, and is a contributing author for The Ritz-Carlton Club, which offers fractional ownership in eight locations in the United States and the Caribbean.  From tropical destinations to popular metropolitan cities, from ski resorts to dreamy golf locations, these homes are built and managed with the same high standards of the world famous Ritz Carlton Hotels.

Katie Hewatt

Katie Hewatt

Katie Hewatt

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