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FAQ's

Buying

  • How many shares is right? More, or less owners?
     

    • True ownership of a fraction of a Vacation Home brings pride in ownership and that can only come from the exclusive right to use your property on a more frequent basis. With 1/10th or 1/8th share of the LLC that has deeded ownership, you will have the right to use the property the same time of year every year as for 5 to 6 weeks. You'll enjoy usage throughout your time, providing you a complete appreciation of your property and the rewards and activities of the community. Studies have determined that the average 2nd home is used less than 30 days per year, so what ever you don't use you can allow friends and family to stay, short term rent it out to cover costs or even trade it with other fractional owners worldwide or within your own HOA.. Our 1/10 or 1/8th share ownership, provides you with the optimum amount of usage time, while not burdening you with more upfront out-of-pocket cost, ongoing expense or use time than you may need. Meaningful and fulfilling ownership, not limited access that doesn't make sense, and doesn't provide you with the real benefits of a vacation property of your own. 

      Please note, while 1/8th is our most popular ownership structure, some of our Fractional VR Vacation Homes are offered in 1/4th, 1/6th, 1/10th and 1/12th interests, depending on local zoning codes and market conditions. In these cases, all documents and operating agreements are adjusted accordingly along with the frequency of use.
       

  • Is buying a fractional vacation home 1031 compliant?
     

    • Yes! When buying a fractional share of a vacation home that can be rented out as an STR, your purchase of a fractional vacation home will qualify within the 1031 exchange rules, as long as you have met the other rules. Make sure you consult with your tax accountant. 

  • Can I buy more than one share?
     

    • Yes, you may purchase more shares to allow you and your family more frequent use of the property up to 50% of the ownership. You can also buy additional interests as they may become available in the future from your fellow share owners, or you may sell your fractional ownership interest to another owner, or any third party, at the then fair market value. 
       

  • How many days per year do I get to use the property?

    • Depending on the size fraction you invested in and the time of year you invested in, you will receive the appropriate number of days the same time each year. Therefore you can count on that time of year and can use it, rent it or trade it as you wish.  
       

  • Do I have the same tax considerations with fractional ownership as with purchasing the entire property exclusively? 
     

    • Fractional ownership is the same as ownership of any other real estate, wherein you enjoy potential appreciation, depreciation, interest and expense deductions. At your discretion, you may sell your share of the property, gift it, or leave it to someone in a Will. Your tax advisor will be better suited to provide specific details, and advise what your individual tax circumstances may offer. You may also register title in your children’s names to assist in estate planning. 

  • Can I finance my purchase?
     

    • Fractional VR has arranged with lenders to provide you a mortgage for your purchase, requiring a typical deposit of 20% of the share price. Most owners will, however, either pay all cash, or opt to pay for their share with equity from their primary residence, using a line of credit.

Using

  • How do I know my schedule for use?
    • With our Booking System you will be able to plan ahead, years in advance, knowing exactly when you can use your property, or rent it out or trade the time with other owners. The only rules are you must be current on your annual taxes and expenses and must give us 90 days advanced notice in the event you want to rent it out part or all of the time, so we can ensure that you get the short term rental occupancy you want or need.
       

  • Can I use the property on holidays? 
     

    • Each owner purchases their fraction based on the time of year and therefore if a holiday falls during your time purchased then yes, you own it and can use it as you see fit. If you prefer to use it during a different holiday you can trade it from another owner or rent it from another owner. That is between you and the other owners.
       

  • As a fractional interest owner, will I have exclusive use of the property?
     

    • Yes, the property will be exclusively yours to use for the entire time you purchased it. You period generally starts at 4:00pm on the first day of the fraction you purchased and ends at 11:00 am the last day of the fraction you purchased. That gives us approximately 32 hours to "deep" clean and prepare the vacation home for the next owner.  The housekeepers completely clean the property and prepare it for each owners’ arrival. You may arrive any time after the scheduled arrival time. Many owners will skip the weekdays and arrive for extended weekends only, renting out the during the week days to help cover some of the costs. We flip/vacation rental clean between vacation rental guests who pay for the cleaning but "deep" clean" between owners which the owners will pay for the "deep cleaning." So if you use it for 3 days, then rent it out for 5 days and then use it for 3 days and rent it out for 5 days, we will flip/vacation rental clean between your occupancy and your renters/guests occupancy and at the end of your fractional period we will "Deep" clean the property for the next set of owners. 
       

  • Can I have guests stay at the property?
     

    • It is your property, you own it , so yes unaccompanied family, friends, business associates, or anyone else you designate, can use the property as your guests, during your time.  Guests are treated as family and may join you anytime, or use the property should your schedule not allow you to attend at the same time. Guests shall be your responsibility and required to respect the CC&R’s, Bylaws and Rules & Regulations.
       

  • Can I rent out my unused time?
     

    • Fractional VRVacation Homes do allow for the rental of your time, however, some may not depending on the operating agreement. In those cases, only owners and their direct guests may use the property. This also helps maintain less wear and tear on the property, and makes its use more personal and exclusive. However if you do want to rent out unused time you can offset annual cost and even realize an return on your investment (ROI) Because the vacation home has rental potential, they do qualify for 1031 exchanges, and additional tax benefits, that your professional tax advisor will need to determine for you. 
       

  • Can I exchange my use of the property with another Co-Owner of the property or even another Fractional VR vacation home owner?
     

    • Absolutely! You own the home and can use it as you see fit. You may exchange some or all of your use with any of the other Co-Owners or other worldwide property owner through our online groups. You will belong to the Overall group with all the owners throughout the world and you will belong to the private group for your property co-owners. You will simply trade and work out the details between you as owners. Then book through our booking system. Very easy.

Ownership


 

  • Where did the concept of fractional ownership originate?
     

    • The concept isn't new, but the term "fractional ownership" is.  Friends, relatives, and business partners have been pooling their resources to buy a second home for centuries.  In the early 1990's, fractional ownership of private jets became popular, followed by yachts, then luxury vacation homes.  According to the National Association of Realtors, in 2004, "36% of all home sales were second homes purchased for either vacation use or investment".  Despite the current market slowdown, the interest and demand for fractional ownership is growing every year, as more and more consumers discover that they can have their proverbial dream vacation home, without all of the expense, hassle or guilt!

      Fractional VR recognized the need for an exclusive vacation home, where a true sense of pride of ownership exists; and the benefits of making a wise purchase can be realized with an eighth-fractional share of the LLC that has deeded ownership, instead of a club membership in an elusive complex, with ever changing properties. Whether it’s a vacation home, private jet, or yacht, fractional ownership is proving to be the best way to purchase and enjoy high-value assets that you don't use full time while still being able to get an ROI each year, if you choose to rent out your time. Keep in mind you will also realize the property value growth when you choose to sell it. 
       

  • Can't I just find a property and purchase it with my friends?
     

    • You can, however, with Fractional VR you don't need to convince 7 or 9  others to buy a share in your dream vacation home, which as most people know, can be very difficult. Further, you will need to prepare a comprehensive set of CC&R's, operating by-laws, rules and regulations, as well as all of the legal and HOA documents for purchase and shared ownership. Instead, with Fractional VR you can just make your own decision to own a share in a larger and more luxurious vacation home, than you could normally afford, in an area where you would otherwise be priced out of the market. With our typical Fractional VR, you'll own a 1/8th or 1/10th share with 7 or 9 other proud owners, not hundreds, like with the "residence clubs" or timeshare properties. We do all of the work, and take all of the risk, identifying the property, refurbishing the property, professionally furnishing it, been the property manager and a team of maintenance professionals, preparing all of the legal documents correctly, and marketing the property to just 8 or 10 exclusive owners. 
       

  • How does fractional ownership primarily differ from the economic considerations for wholly owned real estate?
     

    • Primarily, fractional ownership allows you to afford a much more luxurious, elegant and larger vacation property than you would normally on your own and qualifies for a 1031 exchange. All costs and expenses are all divided and shared amongst the owners vs. carrying the burden by yourself. Ownership is evidenced by a LLC that both protects you from liability but gives you deeded and titled ownership as the LLC owns the property and is "Tenant In Common" grant deed to the property, backed by title insurance, exactly like the home you live in now. However, you still enjoy all the benefits of real estate ownership without the liability and/or stress. This is a true value catering to discriminating investors who are looking for a second home but really don't want the full burden of owning a second home. The more expensive the property, the more fractional ownership makes financial sense! 
       

  • Are there legal agreements between the co-owners?
     

    • Fractional VR has developed, what is considered one of the "best set of proprietary fractional ownership documents" in the industry, from the "co-owners point of view". Each property is owned, governed and operated by a very tight package of legal agreements that remove virtually all ambiguity and questions for each of the owners. These agreements help to assure each owner of their independent quiet enjoyment, legal control, property rights and ownership protection. Without these agreements, a group of owners would effectively be operating on a handshake, with faith that everything will work out. This may work for friends and family (until there is a problem), but a handshake cannot be relied on for independent owners, brought together under this sophisticated structure.  We are confident that after your review, you will agree that virtually every concern has been addressed and prescribed for the benefit of all co-owners, assuring a very safe and enjoyable ownership experience. 

      This package of documents is tailored specifically to each property and the local city codes, and is made available to each buyer in escrow, during their contingency evaluation period. 
       

  • Who are fractional properties really for?
     

    • This type of vacation real estate ownership is ideal if you want the benefits of owning an impressive vacation home (typically of more value than you would afford on your own), complete with management services, investment growth, possible ROI on your investment, possible no annual cost and is located in a very exclusive community, but you can't justify whole ownership because of your projected limited use and or cost. 

      Most fractional owners are frequent visitors to the area, and want something they can call "their own", with friends and family members. These buyers aren't looking to be sold vacation time, but instead want an upscale vacation property without the responsibilities and costs associated with a wholly owned vacation home. Fractional ownership is a lifestyle choice, yet an affordable and sensible way to invest in property, providing most of the benefits of true property ownership. With Fractional VR, you can own several vacation properties - in several parts of the world - collectively for the price of just one!
       

  • How do Fractional VR differ from time-share, residence clubs or condo hotels?
     

    • Both offer luxurious accommodations and services for the person seeking a vacation home. However, the time-share, residence club/condo hotel is the sale of time in a resort and not the sale of an asset / real estate. In timeshare or residence clubs you have no ownership of real property just "time" at the property. The time share or clubs properties also tends to be an individual room or suite located within a major multi-unit complex. In most cases, the ownership is of a "like kind unit", meaning you will rarely stay in the same unit twice. Effectively, you have bought time in a “floating floor plan” in the complex with shared amenities such as pool and spa, even though you may sometimes have access to a specific property, or unit it is still just time that you have bought. Timeshares/Clubs do not qualify under the 1031 exchange rules because you are not investing in property you are purchasing time. 

    • With a Fractional VR you are investing in property and owning property and therefore it does qualify for 1031 exchange and you will own and enjoy the same property, on every visit, not just a floor plan where you float from similar unit to unit. Additionally, a private estate Fractional VR assures you the highest degree of privacy. No public hot tubs, lobbies, parking lots, or hallways!

    • Because Fractional Ownership is ownership in real property the value of your investment will also increase with the value of property in the area. California has seen a consistent increase in property value of 12% annually, so your fractional ownership could realize similar gains in the future. Historical data has shown that timeshares/clubs do not gain in value.

    • Fractional Owners are investors and are allowed to either use their property or short term rent it out to realize a return on their investment, they can also trade their use with other owners. Typical you cannot rent out your timeshare/club membership to cover costs or get a return on your investment. 

    • Timeshare/Residence clubs typical have a "$25,000 annual fees" which equates to $555.00 per day for the 45 days of usage rights.Fractional VR only manages the properties expenses and passes them on to the owner at no mark-up. Property Tax, insurance, maintenance are all pass throughs to the owner without "markup"  

    • The lost interest (cost of funds) for the typical hefty, non-interest bearing $350,000 to $400,000 membership fee adds another significant cost. At just 5%, your cost of funds is $20,000 per year (lost interest that could have been earned in a typical Certificate of Deposit). So, your combined effective cost of funds and annual fees, per year, is about $45,000, before resale fees.  Under most club plans, if you wish to cancel your membership, they charge a significant 20% resale fee. Only 80% of the original fee is refundable should you decide to resign your "club membership"

    • So, lets say you retain your membership for 10 years, that's another $80,000 charge tagged onto the end (resale fee), or about $8,000 per year. Effectively, under this scenario, you will have paid about $48,000 per year. That's $1,066 a day for your use with no equity upside!  

    • If you compare the resale value of timeshare / club with fractional vacation home ownership you will see that with $400,000 purchase in timeshare/club and a 10 year ownership and then you resale you have made no equity gain in fact you will have lost 20% of the original investment never mind the annual fees and interest lost. However, if you invest in fractional ownership of shares of the LLC that has deeded ownership interest in the property, then over the same 10 years, using historical data of 12% growth annually you will be able to sell the property for over $1 000 000, while offsetting your expenses or even getting a return by short term renting out your property during a portion or even all of your fractional purchase


 

  • How is the home furnished?
     

    • Professional decorators have furnished each home in a first class, upscale style, befitting each locale and the architecture. Not trendy, and not tacky. Elegantly appointed from luxurious furniture, to paintings and museum quality panoramic photographs of the local area, decorator touches, draperies, dishes, appliances, cooking gear, linens, towels, comforters, even separate sets of summer and winter bedding. Every detail is thought out to make you feel at home – in some ways better than home. Even board games, pool tables (subject to space), and outdoor toys from mountain bikes, to sleds, pool floats and beach toys as appropriate for your locale, are all provided. No reasonable cost is spared, and nothing is overlooked
       

  • Are there concierge services available to me?
     

    • Personal concierge services are available to owner as desired. Prior to each owner's arrival, the property manager will be certain the toiletries and linens are well stocked, make sure the heating and air conditioning is set to a preferred temperature, instruct the housekeeper to ensure the home is deep cleaned to your satisfaction. At your direction, for an extra fee, our Property Concierge will be sure to spoil you with all of the frills, from personal grocery shopping to stock the fridge and kitchen with your favorite foods and beverages, to a providing a butler, a private chef to prepare your perfect party dinner, a bartender, a nanny, a chauffeur to and from the airport or for a night out, a bodyguard or any special security, or just ordering and arranging fresh flowers before your arrival.  Tee times, restaurant or theater reservations, a day of fishing, yachting or sailing, skiing or surfing lessons, a private massage, hair and spa services, laundry, dry cleaning and even child daycare or pet care services are all available to you as an owner of a Fractional VR
       

  • Is there a valet to help me on arrival?
     

    • Our optional “Meet & Greet” service provided by the property concierge will have a courteous valet meet you at the property upon your arrival. They will arrive before you do, adjust the temperature of the house and the hot tub, turn on the lights, shovel any snow on the entry stairs and walkway, light a fire in the fireplace, turn on the music to your favorite selections, help you bring in your luggage, and even pop the cork on your favorite bottle of wine! All you need to do is arrive. No worries!
       

  • Is the property non-smoking?
     

    • For the comfort of all owners, and maintaining the condition of the property, smoking is not allowed within any area of the home. Smoking outside and away from the home is generally allowed. The HOA is allowed to change these house rules over the years through a voting system. So if you all decide no smoking what so ever then that becomes the "house rules"
         

  • Are pets allowed at the property?
     

    • Owners will collectively decide if their vacation home is pet friendly and establish a special set of rules and conditions regarding their pet’s access to the property. Again, initially pets are allowed however the HOA can always changes these rules over the years based on the voting systems that are in place. ​

General

Costs

  • What are the Operating Costs associated with fractional ownership?
     

    • In addition to the initial acquisition cost, you will "share" in the ongoing "Operating Expenses" including the fixed cost and the variable costs. Shared expenses are appropriated according to number of shares and include property taxes, insurance, all maintenance, garbage, HOA dues, any mandatory repairs, yard work, pool maintenance, internet and so on.  Utilities are NOT shared, fractional owners will pay for their use of the property when they or their guests or their renters use the property. ( electricity, gas and water.) The general household and cleaning supplies, toiletries, fireplace logs,  all fall into the "deep cleaning" fee which must be done every time a fractional owners ends their use period and a new fractional owners starts their use period. "Deep cleaning" is mandatory fee and cannot be conducted by the home owner. only by professional cleaners contracted by the Property Management. They will also stock the house with supplies for the next owner. A "Flip/Renter Cleaning" is done when an owner rents out the property and is conducted between owners guests and/or between renters. These cleaning fees are paid for by the renters/guests as well as the supplies they need and consume (toilet paper, paper towels, shampoos, soaps etc. ).These cleaning fees are also mandatory for guests and renters. Guests or renters cannot do it themselves. 

    • Fractional V Management Fee is a monthly fee of  $99 per fraction to oversee and maintain the property, the bills, the LLC, the taxes, and all other needs of the property and ensures owners needs are taken care of.  If the owner decides to rent out the property for short term rental then Fractional VR will handle the management of that and charge an additional 15% commission on the occupational income only.  Fractional VR will handle the short term rental from A to Z. All marketing, guest communication and relations, all security, and ensure all flip/renter" cleaning and maintain is handled.

    • All upgrades and non mandatory repairs, needed replacement of all furnishings, and so on are voted on by the HOA and implemented by professional licensed contractors.  All expenses are passed through to each Co-Owner on a proportionate to their shares basis without markup by Fractional VR.  The property manager works on a fixed annual fee, without a conflict of interest.  Only optional short term rental services and/or concierge services will be billed directly to any owner requesting them on an a la carte basis. 
       

  • What happens if another Co-Owner doesn’t pay their share of the on-going Operating Expenses, or property taxes?
     

    • In the unlikely event a Co-Owner does not pay their share of the on-going Operating Expenses, then the by laws state that the property management company will short term rent out their use period (Owners cannot use the property during their use period if their account is not in good standing) and use the income generated to offset their delinquent account.   If the Co-Owner is still delinquent after that and still does not pay their share of any expense, as and when due, the fractional HOA may foreclose on that Owner’s shares, following a strict protocol, and reimburse the HOA from the proceeds of the foreclosure. The foreclosed shares will then be resold and proceeds used to pay the delinquent account and the balance held in the LLC bank account as a rainy day fund.  It is unlikely that any action of this severity will ever be necessary. In no case, is are share in the LLC or the deed property held by the LLC ever in jeopardy by another Co-Owner’s default. The buyer of the “foreclosed shares” will then step into the shoes of the defaulting share owner and thereafter be responsible for that equity share’s respective share of expenses. 
       

  • Who controls the Home Owners Association?
     

    • Every Co-Owner is a member of the fractional HOA. Three of the Co-Owners rotate as members of the Board of Directors of the HOA for two year terms each.
       

  • Who manages and maintains the property?
     

    • Initially Fractional VR will manage the property for the first year. Then the Home Owners Association (consisting of all of the Co-Owners) can make a decision to renew the annual contract with Fractional VR or they can hire a different Property Manager for annual periods. We want to work hard to earn your business. The Property Manager manages every aspect of the property including  the complete maintenance and care of your vacation home, the payment of all operating expenses and the annual preparation and filing of the tax return for the HOA.  
       

  • What do the operating expenses cover?
     

    • The ongoing operating expense cover the cost of all maintenance, repair, replacements and wear and tear as required. A professional housekeeper is supervised by the Property Manager, assuring the property is always clean and maintained in a first class condition, as you would expect. Landscape and pool maintenance is performed on a regularly scheduled basis by local professionals, and, where necessary, snow removal as required. Structural maintenance, including painting, and repairs, is provided by the appropriate local trade contractors, as and when needed. Certified professionals from the specific equipment manufacturers and services will maintain the equipment and appliances to our demanding standards. When the homeowners are away, the property manager will look after the property, assuring you the peace of mind that your property is safe and secure. 
       

  • Who is responsible if an Owner or Guests of the Owner or Renters damage the vacation home?
     

    • Other than normal wear and tear, each Owner is responsible for immediate repair or replacement of any damage to the vacation home or to any of the furnishings, fixtures or equipment, if incurred during their use period of the property. If it was their guests or renters then the owners are still responsible for collecting the damages from the guests or renters.
       

  • Are housekeeping services included?
     

    • Each Co-Owner pays for the "deep cleaning" of the vacation home upon their departure. Professional housekeeping charges are passed through to the respective Co-Owner at their actual cost charged by the contracted professional house cleaning service. A flip/renter cleaning is paid for by guests or renters when they use the property. This cleaning is much quicker and less intensive than a "Deep Cleaning" which is done between owners occupancy.. 


  • How can I sell my share in the future?
     

    • You may sell your share to any other owner of the property, or you may sell it to any third party. Typically, resale shares are listed with Fractional VR, or with a local real estate broker, who will promote the sale of your share the same way they promote any other property for sale. The market for fractional ownership shares is massive and growing, as more and more buyers realize the benefits and savings. You may also sell your share yourself, by advertising in any publication, newspaper, or on the internet at free real estate listing sites. You set the price and are in control of the sale, just like any other property sale.

Selling

buying
using
ownership
general
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selling
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