How is Fractional Ownership Different from a Timeshare?
One of the growing trends in real estate is fractional ownership. Fractional ownership is when you actually own part of a property, along with other people. However, because a fractional ownership shares some similarities with a timeshare, it can be confusing to determine which is which.
What is a timeshare?
When you purchase a timeshare, you pay up front to purchase the opportunity to use a particular property a certain amount of time during the year. You often still have to pay for the nights in the hotel or resort, but the rate is usually discounted. You have only a limited time slot, but it is possible to swap your time slot, or even the property your visit, rather easily within the timeshare program.
Some of the downsides to timeshare include the difficulty in selling your timeshare, as well as the fact that few of them increase in value, and the fact that you don’t actually own the property means that you can’t build equity in it.
Fractional real estate
Fractional ownership is a concept growing in popularity because you actually own a piece of property that has the potential to grow in value. Fractional real estate is becoming popular in areas like Sedona, Arizona and Kapolei, Hawaii. It has been a regular fixture of the real estate landscape in places like Aspen, Colorado for years.
Even though there are fees with fractional ownership (timeshare has them too), the main benefit is that you own property, and that it can build equity. Financing for fractional ownership can be tricky, though, since a mortgage is necessary (when a timeshare is financed, it usually means an unsecured loan). However, it is possible.
Fractional ownership is a good option for someone who wants a better chance at a real estate investment return (although returns on fractional ownership have yet to be truly seen), and who can afford the high costs, since fractional real estate costs more than a timeshare.
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