Re-Posted: Fractional Ownership on Oahu, Hawaii

By
Real Estate Agent with Hawaii Military Realty, Inc.

By: David Kucic, Hawaii Home Buying and Selling Team

On May 18, 2007, I posted an article about "Fractional Ownership".  I knew it was coming to Hawaii and today, I saw one of the first signs of it. 

There is a beautiful condominium in downtown Waikiki that now has one of their units up for sale as a fractional.  Previously, this individual unit was listed at $1,299,000.  It is a 2 bedroom, 2 bathroom, 2 parking, Penthouse, within walking distance to the International Market Place and the beautiful beaches, shops and restaurants of Waikiki.  It has 1,802 square feet of interior living space.  There are also a few other fractionals available in Hawaii Kai and Kailua.  Some are condo townhouses and some are single family homes.  There are a few listed at $150,000 for a 1/6 share.

Okay, here is the way it works.  The owner is "fractionalizing" his property at $250k for 6 fractions.  This means that each of the 6 owners (WITH THEIR OWN TITLE TO THE PROPERTY) will get at least 60 days per year to enjoy this home.  Anything less than 60 days would qualify it as a timeshare rather than a fractional.  This is the modern day version of the second home BUT IT IS NOT A TIMESHARE.

Statistics show that most 2nd home owners only use their second home between 6 and 8 weeks per year, wouldn't it make great sense to own a fractional?

There is a lot more to just deciding that you will sell your property as a fractional.  For more information, email me and I can put you in touch with the Hawaii Fractionall Ownership experts.

Here is my original post dated May 18, 2007:

Fractional Ownership:  Get Ready to Jump On The Train If It Hits Your Station  

By: David Kucic, Hawaii Real Estate Agent

Today I attended a brief but very interesting class about "Fractional Ownership".  For those of you that are not in markets that have this program or maybe have never heard of it, I would like to share my notes with you in order to shed some light on the topic.  Laws may differ from state to state but I am in Hawaii and this information pertains to Hawaii.  Please check with your local state fractional ownership expert for details on your state.

  • Fractional Ownership is NOT a timeshare.  A timeshare is a property that has multiple "tenants" that occupy the property for weeks out of the year.  Owners of fractional properties occupy for no less than 60 days each year.  If it were occupied for any time less than 60 days, it would then be a timeshare.
  • Fractional Ownership properties should not be marketed as an investment.  If it were, it would fall under the rules and regulations of the Securities and Exchange Commission (SEC).
  • Fractional ownership is taking the place of 2nd homes in resort destinations.  These destinations would be the same places that you would find timeshares.
  • In Hawaii, the minimum amount of owners is 2 and the max is 6. 
  • THIS ONE IS GREAT......On a 1031 exchange, if the purchase price on the replacement property is less than the amount of the sold property, the difference CAN be used to buy a fractional property!

Benefits to Buyers

  • Each owner has a title policy and deed
  • Price-You could be a fractional owner of a 2 million dollar property for less than 340k (6 owners).
  • Credit issues do not affect other owners
  • Financing is available
  • 5 Star Service
  • Luxury Amenities (granite counters everywhere, travertine flooring etc...)

Benefits to Sellers

  • Sellers can fractionalize their homes as long as it is not expressly forbidden by the condo docs, CC&R's or other regulations.
  • In the absence of comps, lenders will give 140% of FMV.  A 2 mil listing could become a 2.8 mil listing if it is sold fractionalized.

Some statistics to consider....

In 2005, there was a 28% increase in Fractional Ownership

In 2006, there was a 32% increase in Fractional Ownership

The average use of a 2nd home is between 6 and 8 weeks each year.

 

Part 2 of this class will be on June 7th at which time I would be happy to share additional notes. If there is anyone out there that has dealt with these, please share your input.  Are they good, bad?  What are your thoughts? 

 

Aloha!

 

http://www.hawaiipcs.com/

http://www.davidkucic.com/

Search For homes on Hawaii Home Search Link

Search For Homes on Oahu Hawaii MLS

 

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Tags:
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Rainer
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Nalliah Thayabharan
Expert Building Inspections Ltd - Markham, ON
Home Inspector - Commercial Building Inspector Toronto

Hi  Guys !

Thanks for sharing this info with us. Keep posting !

Nalliah Thayabharan

Commercial and Residential Building Inspector

Expert Building Inspections Ltd

Jun 13, 2007 12:13 AM #1
Rainmaker
161,453
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner
Nalliah-You should put some effort into making comments rather than cutting and pasting onto everyones posts.  I looked over all of your comments from the past 2 days and you bring ABSOLUTELY NOTHING to the table when making comments.  Is this a reflection of your business practice?  You are doing yourself more harm than good here on AR.
Jun 13, 2007 04:44 AM #2
Ambassador
1,091,244
Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

David:  Okay David...calm down. haha.  (what is that anyway?,,,,Nevermind I just found out and came to edit....she is posting on everyone's the same thing...delete it!  Mark it as spam!) 

Anyway, the fractional thing may be okay for some...I think I would like to stick with full on fee simple and maybe even leasehold (to date I have not done one as I make sure and let the client know they are just paying a lease on the land) but fractional?  It looks to me like it is just an "extended" time share and though may be good for two month or more "vacationers" it looks like just a bunch of property management trouble. What do you think? Find out more and let us know.

Jun 13, 2007 05:35 AM #3
Rainmaker
161,453
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner

I checked on the first comment (see above) and this guy has cut and pasted the exact same comments to everything that he comments on.  Yuk!

As for the fractionals thing, well, I am no way even close to an expert but I wanted to try learning about it.  I will keep up with Randys post too to see if any agents from resort areas chime in and give their feedback on fractionals.

This is another reason I am interested:  My family that is in the mainland would all like to own a piece of Hawaii but nobody wants to buy something outright.  This could be their way of owning something beautiful for a fraction of the cost.

I dont beleive that they will be able to fractionalize anything that is leasehold.  It will most likely only be fee simple properties. 

It would be for vacationers but is geared toward peoples 2nd, 3rd and 4th homes.  It also allows them to gain equity as opposed to time shares and they can always sell their share in the future.

I will keep reading, learning and attending the classes and I will keep this post updated.  Aloha!

Jun 13, 2007 08:36 AM #4
Ambassador
1,091,244
Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE
Delete the thing. That one went on Randy's too.  Keep us posted.
Jun 13, 2007 09:21 AM #5
Rainmaker
161,453
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner

I was going to delete it but I wanted to let him know that I was onto him!  He went and did it on Randys too?  I bet it was the same comment.

 

Jun 13, 2007 09:37 AM #6
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Rainmaker
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1SG (Ret.) David Kucic

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