What Is The Difference Between Timeshares And Fractional Ownership?

When most people think about timeshares and fractional ownership properties

, they imagine paying for the right to a few weeks of vacation time a year, usually in a luxury home or condominium near popular tourist destinations. In reality, there are actually some stark differences between standard timeshare properties and those that are classified as fractional ownership.

When buying a timeshare, investors are purchasing the right to use a property for a specific allotment of "time" each year. They "share" this property with other investors. The allotments may be for one week or longer. In most cases, this does not include any ownership in the real estate; instead, it is typically owned by a development company or other entity. Investors simply own the right to its use. Consequently, they also do not benefit from any appreciation of the real estate or from any of the proceeds if the resort is sold to another owner. Despite this fact, most resort companies also require investors to pay a hefty yearly maintenance fee to cover taxes and upkeep.

Today, many of the most popular timeshares don't require investors to use their time allotment at the same time every year. Instead, buyers have "floating" weeks that can be reserved by the investors each year based on availability -- much like one reserves a hotel room. Some timeshare arrangements include properties in multiple locations, allowing people to choose different resorts in different areas each year, and may even allow people to trade "credits" for use between other resort companies.

While fractional, or shared, ownership properties have similarities to timeshares, fractional ownership offers investors more perks. The major difference is that the investors own a share of the property as well as a time allotment in which they can use it. The number of people who have shares determines the length of time each investor is allotted. For example, if four people each own a quarter share, then the property would be at the disposal of each investor for three months out of the year. Because the investors each own a pre-determined share of the house, they are equally liable for the upkeep and taxes. However, they are also equally entitled to benefit from an appreciated value or proceeds from the sale of the real estate.

Fractional ownership properties are becoming more and more popular. The most attractive benefit of this arrangement is that it allows people to purchase property they may otherwise have not been able to afford. Additionally, the burden of the expenses of maintaining the property throughout the year is shared equally among the co-owners, making the arrangement even more affordable as well as less stressful.

In addition, most fractional ownership properties allow investors to enjoy the property for considerably more time than possible in a standard timeshare. Investors in these properties may choose to live in the property three months out of the year - or for however long their share is worth - or to just have secure lodging during extended vacation times.

Fractional ownership properties may not offer quite the same flexibility some timeshares provide (i.e., "floating" weeks and the ability to exchange credits easily between resort companies). However, savvy shared property owners may instead opt to rent out their share in increments of a week or month. This way, their share ends up paying for itself several times over.

by: Stephen Daniels

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