Fractional Ownership More Than Just a Vacation Home

Timeshares have been around for decades, and these partial property ownership arrangements are more familiar to many people in part because of their increasing popularity. It’s easy to see why they are so popular: A family wants a vacation home, but rather than take out a new mortgage and buy a property outright, they pay to share an existing property with other investors. The fee they pay entitles them to use the property for a specified period of time at a certain time of the year.

Timeshares are popular in vacation areas such as the Outer Banks of North Carolina, Florida, Colorado and elsewhere. The affordability of timeshares and the flexibility of this type of ownership are two reasons why timesharing, known in another form as fractional ownership, now is catching on in New York City. These days, some people are buying condos to share among a group of investors. Others buy a block of time in a condo to be able to plan their vacations around entertainment and shopping in New York City.

But what exactly is the difference between fractional ownership and timesharing? On the face of it, the two property transactions might seem the same—the consumer is buying the use of some of the available time of a property. In reality, the difference between a timeshare and a fractional ownership could be as stark as the difference between property that can be deeded to heirs, and a leased property with a predefined term of 20 years. Knowing what type of property you’re interested in buying, whether it’s just one week, or six weeks, a timeshare or a fractional ownership, is the best place to start when considering a move into the world of shared property ownership.

Fractionals vs. Timeshares

While timeshares have been around for decades, fractional ownership of apartments is a newer concept of shared ownership that caters to a higher-income client. The main differences between timeshares and fractional ownerships in New York City amount to differences in terms, conditions and demographics. Unlike timeshares, which often begin at one-week shares, fractional ownerships generally start at two-week terms, and can be as lengthy as 18 weeks.

The financial differences in the types of buyers purchasing timeshares and fractional ownerships are partly what dictate the amenities that the two groups are offered. The average timeshare buyer makes $85,000 annually and buys a one-week interval in a timeshare, costing about $20,000. In contrast, the average fractional apartment owner has an income of $250,000, and will spend about $170,000 on a six-week share in an apartment, says Richard Ragatz, owner of Eugene, Oregon-based Ragatz Associates, a timeshare/fractional ownership consultant firm. Comments of other timeshare industry experts back up those figures.

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