Everybody wants to own their own slice of paradise and in the 1970s, vacationers first saw the emergence of timeshares as a way of achieving that dream. This provided an alternative to whole ownership of a vacation property.
For decades, timeshares have been popular in the world of hotel-style suites and provided the opportunity to “own” a vacation home with amenities that would otherwise be financially unattainable.
Just like its timeshare and vacation rental predecessors, you might ask is fractional ownership worth it? We’ve explored the pros and cons in this blog.
- Pros of Fractional Ownership
- Cons of Fractional Ownership
- Fractional Ownership vs Condo Hotel Ownership
Pros of Fractional Ownership
In fractional ownership, you typically own a minority shareholding (sometimes called a deeded shared interest or equity) in a company that owns the title to the property. This a right to use the property for an allotted time period (usually a week) and is what differentiates fractional ownership from timeshare.
Here are some advantages to this type of ownership.
Share the Costs to Make It More Affordable
Many people dream of owning a vacation home in a spectacular destination, but sometimes their income just doesn’t allow it. It’s practically impossible to secure a mortgage on a fractional property so you will normally need cash to purchase. However, by joining in with four (six, eight, 10 or 12) property partners, you can split the costs of buying and running a vacation home.
Perhaps a $3M condo is out of reach, but $1M is in your range. Fractional ownership lets you get the property you want in the most desirable location at the price you can afford. This goes for home maintenance too.
Peace of Mind and Shared Duties
Fractional ownership also means sharing the burden of homeownership. You essentially have a group that shares accountability, maintenance, checks on the condo and divides the work that would otherwise be left to one single owner.
By sharing the costs of upkeep, fractional ownership makes long-term ownership a much more realistic possibility. However, with these advantages come some disadvantages.
Cons of Fractional Ownership
Fractional ownership lets you spend time in a vacation destination, but even with all the wonderful views, there are some cons you must consider before making your decision.
Can Be Difficult to Resell
In traditional fractional ownership, selling isn’t as straightforward as whole ownership. In addition, it’s very hard in some markets to find an agent who will sell a fractional ownership. In some markets, it’s just too difficult to sell.
Many times, prospective buyers are cautious about joining into a partnership with someone they don’t know very well. Also, partners in the ownership have the potential to make it extremely difficult for the property to sell in anticipation that they easily acquire full ownership or more of the ownership for significantly less.
Plans Have the Potential to Clash
With fractional ownership, you might find that one owner wants to use the property for just personal getaways and family members, while another partner may want to rent it out as a short-term vacation rental.
Although short-term vacation renters can bring in extra money, renters can also damage the property and limit the owners’ overall usage of the property. When you’re working with groups of between four and 10 owners, this decision process can sometimes be long and unproductive.
HOA or Local Regulations Can Cause Restrictions
Some communities are now cracking down on fractional ownership of vacation homes.
While it’s hard for them to eliminate it altogether, some Homeowners’ Associations (HOAs) are limiting ownership privileges to just one or two owners.
As with vacation rentals and vacation properties, fractionally owned vacation properties could be subject to HOA restrictions and even banned outright in certain areas.
Fractional ownership is just like anything else - it has its pros and cons. Even though it’s a popular choice, whole ownership has the pros of fractional but with added advantages. An increasing number of individuals prefer it because of the added perks.
Here’s how the two weigh up.
Fractional Ownership vs Condo Hotel Ownership
- Deeded shareholder interest in a fraction of a property e.g. a 12th, 10th or a 6th.
- Owning a 12th fraction gives you 28 days usage each year. A 6th would give you 56 days usage each year.
- Only your unused days from this usage allocation are available for rental.
- Annual charges are broadly the same as a condo-hotel but only cover the fractional interest period.
- Marketing of rental weeks is done by the in-house property manager.
- Only weekly rentals are available generally.
Condo hotel whole-ownership
- With condo-hotel ownership you have deeded whole-ownership title of a property.
- You also have 90 days available for personal use each year.
- You then own the remaining 275 days of the year, which can be made available for rental through the hotel.
- The condo owner receives a unique property reference "Assessment Number", giving them the right to own a car in Bermuda.
- Annual charges are broadly the same as fractional but cover the full year.
- HomeOwner’s Association fees for a studio are less than $5,000 per year.
- Bookings are marketed through Hilton’s global reservation system giving condo owners access to Hilton's huge client base.
- Nightly hotel rates are available and flexible booking dates improve rental occupancy.
Now, with condo hotel whole ownership on the rise, it offers the best way to own and enjoy vacation condos in many sought after locations. Want to own a slice of paradise?
Discover More About Vacation Condo Hotel Ownership
Whole ownership in a condo hotel resort presents a fantastic opportunity to own property in a spectacular vacation destination. That’s why we’ve created a visual guide for everything you need to know about owning a condo on the beautiful island of Bermuda.
From how it compares to fractional ownership to everything about the condo hotel and its relationship with prestigious hospitality giant Hilton. Click below to get access and start your journey.