Fractional ownership vacation homes are something that has been around for years but has just now hit the investment real estate market (i.e. vacation homes, townhouses, condos, etc). For years business men and women have been using the fractional ownership technique to purchase everything from private jets to expensive jewelry. Fractional ownership broken down basically means that you and a group of people (often times friends and family) pool your resources together to purchase an otherwise expensive product. This tactic makes investments have a lower risk and to most of us this is a better aspect in investing.

Fractional ownership works very well for the family that wants a nice vacation home to call their own. Although, is geared toward the individual that does not want to spend $400,000 on a place they will only use a few weeks out of the year. If you are only planning on using the vacation home one month out of the year, do you really want to pay the mortgage and upkeep costs the other 11 months of the year?  This investment strategy is a wonderful choice for those cash conscientious investors.

Equal Fractions

This product is then split up evenly among the investors where each investor owns an equal fraction of the investment. With vacation homes this means that each investor has either one or two months to use the vacation home (the number of months depend on the number of the investors).  In this method of investment the common policy is the more the merrier. Although, you have to be careful; remember each investor owns just as much as you do.

The difference between fractional ownerships and timeshares

Now, if you are anything like me a big alarm is going off in your head and your thinking that fractional ownership is nothing more then a fancy way of saying timeshare. Well it is true, fractional ownership vacation homes do share some similarities but don't confuse the two as the same.  Many aspects make this investment a better choice when associated with some of the horrors of a timeshare investor can face.

Here are some of the major differences between buying a fractional ownership vacation home vs. a timeshare:

Luxury

Fractional ownership vacation homes are much bigger and usually a lot nicer. Timeshares tend to be small, cheap, cookie cutter housing. They are typically pawned off to unsuspecting tourists by pushy salespeople that don't take no for an answer. Fractional ownership properties are very classy and are actually worth the combined total of the investment from each investor. This may sound a little confusing so I will break it down for you:

Timeshare:
      25 investors (each investor buys 2 weeks) x $47,000 = $1,175,000 house.
      *Usually these timeshares are valued well below $150,000

Fractional Ownership:
     12 investors (each investor buys 1 month) x $50,000 = $600,000 house.
Fractional ownership houses are valued around $550,000-600,000. In fact if you compare timeshare to fractional ownerships, you will notice that per week timeshares are more expensive for less room and lower class furnishings.

Global exchange

Global exchange gives you the option to exchange unused weeks at your fractional to vacation in multiple vacation spots around the world. Many timeshares offer this as well but the houses and amenities in times are typically much much lower then a fractional. If you're going to a vacation in Greece do you really want to spend it in a cramped 500 sq ft studio apartment in the bad part of town?

Easier financing

Banks and lenders consider fractional ownership homes to be similar to a second home, so it is usually easier to finance a fractional over a timeshare. Also, the rates are often lower on a fractional ownership.  With this said not just anyone can get fractional ownership, this proves its distinction from the dreaded timeshares.

An actual investment

Fractional ownership is an actual investment. Timeshares, on the other hand, are like Cadillac’s. These investments tend to plummet in price as soon as you sign the paper. If you go on EBay right now you will see hundreds of people trying to sell their timeshares. The price is a tiny fraction of what they paid for it just a few months prior. With fractional ownership the property value increases and so does your investment. This is especially seen if you invest in preconstruction fractional ownerships. These investments are associated with a higher level of risk but this is how you get the large payoff.  Normal fractional ownerships have little to no risk associated with them. This is just an idea to make more money off this opportunity.

On average a family uses its vacation or second home about 28 days a year. This is why fractional ownership has started, it was created because their truly is a market for it. Fractional ownership opens a door for the thousands of investors that want a luxury vacation homes but do not want to pay hundreds of thousands for it. These properties are in greater demand than typical real estate investments.  With this said, if you are interested in any fractional ownership opportunities you should start looking now.