Fractional ownership has gained momentum over the last couple of years. There are a variety of ownership entities including; timeshares, destination clubs and deeded fractional shares.
We have been involved in the sale of deeded fractional shares. What does that mean? Typically the shares are 1/4 to 1/8 ownership. Why did this evolve? There are two reasons. Firstly, the average second home user is for period of 18 days. The rest of the time the property sits vacant or is rented. Secondly as second home prices have soared affordability has wained.
Shared ownership is not new and has been successful in Colorado, Park City, Telluride, Whistler/Blackcomb and here in Tahoe. The buyers we have represented love the product. They end up with a fabulous home for the same price as an older condominium.
Ownership is deeded. It is like you and some other friends buy a property and take shared tenant in common ownership.
What do you need to know? Well, how much and how are they valued. Rather than a price per square foot you look at the price per week. In our market that ranges from $50k to $100k per week. Also what are the dues? The only additional cost that you have from a single family residence is management and any concierge services the property may provide.
Management is critical. Properties identified as ONE OFFS are when a owner only does one property. This structure is hard to provide professional management as there is not enough product. A developer with management arm is the way to go so you have an on-line reservation system and strength.
Fractional shares can be financed and qualify for 1031 exchanges.
This type of product is complicated with over a hundred pages of documents so if you are thinking of becoming a selling agent, make sure there is a market for more than one. You have to educate the other agents and buyers.
We have completed one property, have two almost sold out, a third for sale and developers looking for more. Like all real estate once you have the system then the process is much easier. Commissions typically are higher than for conventional real estate.
If you are a realtor in a resort market you probably have heard of it and I would encourage you to get involved. Major cities such as New York, San Francisco, Miami and LA are also ripe for the buyer that would like to have a part time home in the city.
Check http://www.truckeeinfo.com/files/fractionals.htm for more info.