Fractional Ownership

By: Lionel Wayne

What is fractional Cottage Ownership? You hear the term allthe time, yet what does it mean? Is it a Timeshare? Do you own real property? Fractional cottage ownership has become quite popularin the last few years. There are companies that specialize in findingproperties that are suitable for fractional ownership. These same companiesthen buy the properties and repackage them for sale in the fractional ownershipmarket. Often these companies will also manage the properties and assist thegroups of owners in renting the property. Obviously for this service there is acharge, but many fractional cottage owners feel it is well worth the cost.

So what isfractional ownership? Essentially, a small group of people or families decideto split the cost of purchase and maintenance of a vacation property and shareits use. The one point that needs to be emphasized with fractional ownership isthat the group of people that own the cottage actually are on title to theland, and the building. Like any other property the value of this land andbuilding will go up and down as the real estate market does. Most fractionalcottages are usually larger units owned by fewer people and most usually do not losetheir value over time. In fact most appreciate in value just like they would ifthey where owned individually.

Sometimein the early 1990’s, fractional ownership started to become very popular.Agencies would offer fractional ownership programs that would usually involvebuying a percentage ownership of a vacation property with a partnershipagreement in place that would stipulate how many weeks each partner could havefor their own personal use as well as a schedule of when those weeks could beused.

Thereare some distinct advantages of participating in a fractional ownershipprogram. The owners can stay for fairly extended periods of time, such as, 4-6weeks, as opposed to other options where the duration of the stay may be set toa rather short period of time. A huge advantage is that they are usually easierto finance through lenders because the risk is spread among several owners.

Anotheradvantage of fractional ownership is that maintenance is usually provided yearround and the costs for this upkeep are divided amongst all the owners. Itcosts less to keep the place and the property is available all year round andmay often be used out of season. Probably one of the best advantages offractional ownership is that the properties themselves are usually much easierto sell. When it is time to get out, it is easy to do so.

Naturally these advantages can tend to drive up theprices of fractional ownership as opposed to other less expensive alternatives.Luxury fractional ownership can sometimes cost as much as $200,000 per shareand does not including maintenance and operating costs, however, there are moreaffordable fractional properties that can be found in the $29Psychology Articles,000 range with aslow as a 30% down payment and around a $140 monthly maintenance fee.

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