The Difference Between Fractional Ownership And Timeshares

Travelers across the country are taking advantage of various types of vacation accommodation at a growing rate. Vacationers have discovered that by investing in a timeshare or pursuing a fractional investment, they can enjoy the comforts of home and save money at the same time. If your family is one who likes to travel frequently, you should know that you have two great options when it comes to where you will lay your head at night.



Timeshares

Timeshares are properties owned by a person who sells the privilege to stay in the property to as many as 52 people. Your investment gives you the right to stay in the home or apartment for a set period of time each year. The more investors, the shorter your available stay. This investment is perfect for those who want to travel to the same area for one week out of the year.

People who purchase options in a time share are typically not emotionally invested in the property. When so many people own a share in a single property, you can realistically expect more wear and tear both inside and out. This can be avoided by investing in the property with family and friends.

Fractional Investments

This type of set-up involves purchasing a home with up to 15 other people. Ownership of the property is no different than if you were the sole buyer. You will be required to pay your share of the mortgage, property taxes and insurance. While the annual household income for timeshare investors is approximately $75,000, those who invest in fractional ownership typically bring home over $150,000 per year.

Travelers who take advantage of a fractional ownership will do so for a variety of reasons. Fractionals are often more relaxed, cleaner and better maintained. Fractionals can also be considered an investment and typically sell well regardless of the current real estate market.

Pitfalls to Investing

While there are many positives to investing in vacation properties, there are also potential pitfalls. For instance, before you sign any contract, you should be made well aware of who will be responsible for the maintenance of the property. Will a portion of your payments be set aside to make any necessary repairs or will you be required to pay out of pocket?

Each investor should also be sure that the other parties have been well vetted. Just as you wouldn’t blindly jump into home ownership with a stranger, you shouldn’t participate in a timeshare or fractional investment with people that you haven’t at least spoken with.  With regards to timeshares, investors should know that their value tends to plummet rapidly. In fact, many timeshares lose 99 percent of their value in a few years’ time. If you need to get out of your investment, your best option will be to sell to a co-investor.

There are pros and cons to these accommodation options that you should be aware of before you invest. While knowing that you don’t have to spend a week in a hotel can be well worth the money you spend on your property, you may have a difficult time unloading it when the time comes. Before you sign on the dotted line, make sure that you understand the benefits and drawbacks of both options in order to choose the best for your needs.

Article written by Georgina Clatworthy, an experienced finance and investment writer for the real estate niche.  She is currently a contributing writer for luxury hotel and resort group, Ritz Carlton who offers fractional ownership investments for those seeking flexible vacation options with luxury amenities, backed by a company renowned for its service excellence.