Fractional Ownership
Definition:
Fractional ownership is a method where several unrelated parties share ownership of a high- value tangible assets, such as resort real estate. Each party owns a percentage of the real estate assets, and the title is divided proportionally. For example, in the case of Ships Watch, each house has 10 shares available for purchase. Fractional shares enable vacationers with limited funds to buy into resort real estate.
Why Consider Fractional Ownership?
Fractional ownership allows individuals to own a vacation property for a fraction of the cost. Owners share the benefits of usage rights, income sharing, priority access, and reduced rates. Each share typically entitles the owner to 5 weeks of vacation time, rotating within the four seasons, with a double week that also rotates annually.
Owners also share responsibility for the maintenance and upkeep of the property. Costs for improvements, repairs, or replacements are shared among the owners, usually through maintenance fees or assessments handled by a management company.
Fractional owners are not required to use all their allotted time themselves. They can allow family members, friends, business associates, or employees to use some of their time. Additionally, they might rent out their remaining time to other owners or third parties who are not owners.
Fractional Ownership vs. Timeshare
The main difference between fractional ownership and a timeshare is that fractional owners hold a portion of the title, not just units of time. With fractional ownership, if the asset’s value increases, the value of the shares also increases. This means the value of an owner’s share changes as the asset appreciates or depreciates. Additionally, each fractional owner has a say in the management and use of the asset.