​​
 

• 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