The Benefits of Fractional Ownership in Private Residence Clubs
by Joel Greene
For the Select Few
Fractional ownership of vacation homes, also called private residence clubs, is
a relatively new concept that allows you to enjoy four to 12 weeks of home
ownership privileges per year at an upscale, luxury resort but at a fraction of
the cost of whole ownership.
If you want to own an impressive second home complete with personalized services
and located in an expensive resort area but can’t quite justify the expense
because you’ll only be using it a few weeks or months of the year, this type of
real estate arrangement may appeal to you.
Amenities Galore
Most private residence clubs offer extensive amenities. These may include an
extravagant clubhouse and spa, plus five-star hotel services, the kind you
couldn’t expect to have in a wholly-owned vacation home, high-end condo or
timeshare.
Imagine this: You are going on vacation and you call ahead to the staff at your
private residence club home. At your request, the staff shops for your
groceries, dry-cleans your clothing, makes your restaurant reservations, heats
your private splash pool, and places knick-knacks and favorite pictures of
family members around your residence. You are met at the airport by a staff
person who shuttles you to your home where a just-detailed Jaguar is sitting in
your parking space for use at your disposal.
Get the picture? Private residence clubs are NOT your ordinary second home.
Outstanding Locations
Fractionals or residence clubs have sprung up in exclusive, world-class resort
destinations worldwide. St. Thomas, Virgin Islands, Puerta Vallarta and Mexico
are popular locations.
In the U.S., the first fractionals were in major ski areas out west,
particularly Colorado where real estate was so costly that wholly-owned second
homes were out of the question for most people. Eventually they spread to
northeastern ski areas. Since then fractionals have begun appearing in
golf-oriented communities like Hilton Head Island, South Carolina and popular
beach states like Florida.
Some of the most popular fractionals can be found in Jupiter, FL; Aspen
Highlands, Bachelor Gulch, and Aspen Snowmass, CO; Lake Tahoe, CA; and Whistler,
British Columbia. Fractionals located in the U.S. usually offer good access to
major airports that allows for easy transportation arrangements.
Management by Five-Star Companies
The key to the success of fractionals is their professional management. Most are
operated by well-respected hospitality companies known worldwide for their
world-class resorts. Among them are Ritz Carlton, Four Seasons, Starwood,
Intrawest and Millennium, brands known for their five-star services and
amenities.
Hassle-free Ownership
Part of the appeal of fractionals is that they are completely hassle free. In
addition to having a staff for personalized service at your disposal, at a
private residence club you never have to worry about repairs, maintenance or
housekeeping. Everything is included in the price and annual fees and taken care
of by the professional management company.
Appreciation Potential
To date there have been very few fractional resort developments. The demand is
high. As a result, it is likely there will be substantial appreciation, rather
than the depreciation that usually occurs with timeshares.
Real estate experts say that the outlook for investment appreciation appears
excellent. You can expect at the very least an appreciation parity against other
real estate in the resort area in which the fractional is located.
Prices
To buy a fractional, you pay a one-time purchase price and then a yearly upkeep
fee that covers all of the expenses associated with property ownership and its
use and services.
What do fractionals cost? Prices vary based on the size, amenities and location
of the individual property. But most are in the $100,000-$500,000 range. Keep in
mind that these are truly top-of-the-line homes that would cost you two to five
times as much if purchased outright as wholly-owned vacation homes.
Comparison of Fractionals to Timeshares
How do fractionals compare with timeshares? They really don’t. Fractionals are
far more exclusive and include many more luxury amenities and services than
timeshares. They tend to be larger homes, usually three to five bedrooms.
Timeshares usually allow you use for just one to two weeks per year. Fractionals
offer from two to 13 weeks, and those don't necessarily have to be consecutive
weeks. Pick the weeks you want.
With regard to financing, obtaining a bank or mortgage company loan on a
timeshare is difficult. Rates are high, regardless of how good your credit.
That's because it’s a well-known fact that most timeshares depreciate over time.
Conversely, banks and mortgage firms consider fractionals to be appreciating
assets and will often treat them like any other second-home purchase.
Why do fractionals tend to appreciate while timeshares usually depreciate? There
are a couple of reasons. With fractionals, more of the buyer's dollar goes to
high quality finishes and "bricks and mortar" vs. sales commissions which can be
as high as 40%-50% with timeshares.
Furthermore, timeshare values have historically been poor because of the large
number of resales on the market, not to mention a continuous stream of new
developments. The fact is the secondary market for timeshares has never really
developed.
Conversely, there are a limited number of fractionals on the market. Most
likely, that number will stay small because fractionals are built in only the
very best, most highly desirable locations. Therefore, demand outpaces supply
and results in property appreciation.
Comparison of Fractionals to Condo Hotels
Fractionals (private residence clubs) differ from condo hotels in that you have
a set amount of time when you can use your vacation home. Condo hotels are in
fact, condos located within hotels. You can use your unit whenever you want, and
place it in the rental program when not using it. Fractionals do not offer
rental program participation.
Fractionals tend to be larger than most condo hotel units. Most fractionals
offer three to five bedrooms, while most condo hotel units are studios, one
bedrooms or two bedrooms. Currently, most condo hotels are located in Miami and
other surrounding cities in South Florida. Fractionals are most prevalent on the
West Coast, particularly in ski areas. However, both types of real estate are
rapidly gaining popularity and soon there will likely be more of a supply across
the country to meet the growing demand.
Bio:
Joel Greene is the President of Condo Hotel Center located in Miami Florida,
which specializes in the sale of condo hotels and private residence clubs. Condo
Hotel Center is a division of Sheldon Greene & Associates, Inc. Located in
Miami, Florida, it is the south's largest and oldest brokerage firm in the hotel
field, having started in 1970. Sheldon and son, Joel Greene, have worked closely
together since 1988.
Joel has been referred to as an expert in the field of condo hotels and private
residence clubs and has been interviewed for various articles on the subject,
including The Wall Street Journal, The New York Times, Vacation Ownership, The
Florida Business Review, and several United Kingdom magazines, New
Horizons-Florida and Financial Times.
Visit Joel’s web site for more information on condo hotels and private residence
clubs. www.condohotelcenter.com.