By Pat Curry, bankrate.com | Published: 11/01/2007
The big differences between fractional ownership properties and time shares are in prices, financing and fees. While time shares can be had for a few thousand dollars, fractional ownerships can run $100,000 or much more.
"We have a property in Aspen now that the quarter shares are $1.5 million," says Doug Freyschlag, president of Alpine Quarters in Denver. "Even at that price level, it still makes just as much sense as any other level."
Most developers offer their own financing for time shares (the terms are akin to those of a personal loan, in the 14 percent interest range). But it's generally not an option for fractional ownership properties because the purchase is too large.
Two-thirds of Alpine Quarters' buyers pay cash or finance the purchase through a home equity line, Freyschlag says. About a third will finance the deal. Buyers should expect terms that are similar to those paid by real estate investors: a percentage point or two higher than they would get if they were buying a primary residence with a down payment of 20 percent.
That's if they can find a bank willing to do the deal. Lenders are gun-shy about taking on the loans because they see them as high risk, says Anthony Hsieh, president of the Home Loan Center in California.
Buyers can expect a hefty annual maintenance fee. Rates of $5,000 a year or more are not uncommon. But then, they can call the management company a few days before they get to town, have the refrigerator stocked with their favorite goodies, arrange a tee time or a day of deep-sea fishing, and make sure the air conditioning is set at their favorite temperature.
To defray those costs, most people who buy a fraction in a vacation home wind up renting it out for at least part of the time.
Who You Need
There are small players and big guns who offer fractional ownership properties. If you're in love with one locale and could see yourself going back to the same place over and over, a small company could be just the ticket. If you'd like more flexibility, some major corporations such as Ritz-Carlton, the Four Seasons, Disney and Marriott also are in the business.
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