What is a Shared or Fractional Ownership Property?
A Shared Ownership arrangement (also known as Fractional Ownership) offers the benefits of equity-based deeded real estate ownership, combined with the prestige and exclusivity of owning real estate in highly desirable locations for a fraction of the cost of an entire home. It is a method of co-ownership of a property (home, condo, boat, etc.). Several families, or people, can share the ownership, in an LLC partnership or as deeded Tenants in Common. The use and the cost of the property is shared equally. Most shared ownerships, whether a LLC or Tenants in Common, have an Operating Agreement that is a contractual agreement among all the shareholders. It defines the use of the property; management, maintenance, budgeting, use scheduling, house rules, etc.
How it Works
Owners purchase a deeded share in a residence, or membership in a LLC, (usually between 1/4 share to as small as a 1/8th share) that gives them a certain amount of use time per year at the property. The amount of use time is based upon the size of the share and is spread throughout the year. For example, a 1/4th share provides 12 weeks use or a 1/8th share provides forty-four nights use per year.
How Does it Differ from Timeshare?
Fractional Ownerships differ greatly from the old-style Timeshares because unlike Timeshares, Shared Ownerships offer:
- Deed to the property, with the same rights as any other real estate purchase
- Equity value that moves both up and down with the market
- Longer amount of use time at the property (from 6-12 weeks per year)
- Higher level of luxury in furnishings, services, and amenities
How Does it Differ from Short-Term Rentals?
Fractional Ownership differs greatly from short-term rentals because unlike short-term rentals Shared Ownerships offer:
- Use of property solely by owners and guests, not renters
- Owners are invested in the property and the community
- Deed to the property, with the same rights as any other real estate purchase
- Equity value that moves both up and down with the market
- Longer amount of use time at the property (from 6-12 weeks per year)
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Benefits of Buying a Shared or Fractional Ownership Property
Co-owning is a more affordable means to own vacation property. Shared ownership means price matches usage since most people don’t vacation more than 6 to 12 weeks per year. Shared ownership is a way to pay for just the time used and not for unoccupied time, like in a whole ownership. Shareholders also pay homeowners fees (which they would be paying monthly anyway, at a higher rate, on a whole ownership), plus have services that would not be available with whole ownership. Financing is occasionally available on some Shared Ownerships.
Benefits of Selling a Share of Your Vacation Home
Co-ownership can help cover the costs of owning a vacation home by having other invested owners using and maintaining the property rather than short-term renters. Sharing ownership allows an owner to take equity out of their vacation home without having to give up owning and use of their home.
Benefits to the Community of a Shared or Fractional Ownership Property
- Second homeowners support the local community but many vacation homes sit vacant for up to 10 months out of the year. With multiple owners in one house, occupancy goes up and so does participation and spending in the local community.
- More families in the area adds more community members and more diversity to a community.
- Less vacant houses.
- No short-term rentals and all the headaches that comes with Airbnb neighbors.
- More neighbors who are invested in their neighborhood because they spend time there.
- Owners, not renters, make a significant investment in their property and bring an owner mentality, not a vacation-renter mentality.
- Vacation communities are struggling with housing shortages and higher home prices. Shared Ownership properties help to relieve this pressure by consolidating up to eight buyers into one home, removing them from competition for moderately priced homes needed by the local workforce.
- Lowering the barriers to second home ownership. Helping a broader pool of aspiring second home buyers purchase real estate and become part of the community.
How do I find Shared or Fractional Ownership Properties in the Area I am interested in?
- Contact me, grankin@chaseinternational.com or call me at 530.913.6020.
- Sign up for my Shared and Fractional Ownership Newsletter and get up to date information on Fractional Ownership opportunities in a variety of areas.
- Click HERE to see Shared Ownership properties in the North Lake Tahoe and Truckee Region.
How do I Buy a Share?
There is no difference between buying a whole ownership or a share in a home or condo. It is the same process; using a real estate agent, inspections, approvals, going through the escrow process etc.
How do I Set up a Shared or Fractional Ownership? Or How do I Sell Shares in My Vacation Home?
Determine an accurate property evaluation and if it fits the type of home shared ownership buyers want.
Then enlist and expert to help you:
- Create an operating agreement or a contract that would determine how the property is used how to divide up shares and how the costs are shared.
- Decide how you want to share use and schedule use of the property.
- Find a listing agent who is familiar with Shared Ownership and can find buyers.
This process of course is very individualized for each property and each seller and is therefore recommended that you consult an expert in Shared Ownerships to determine if it is the right path for you and your home.
