With all of the shifts we have seen in the last several years in the housing market it is hard to keep up with the trends, let alone make predictions where the market will be in another 5 years. One trend however that has gained momentum and will not be going away anytime soon is Shared or Fractional Ownership properties. With housing prices rising rapidly and a lack of inventory, Shared ownership properties have become a new and reasonable way for more people to be second homeowners in the vacation destinations that they love.
In vacation destinations the cost of homes has risen dramatically in the last decade. This rise in price has left many people out of the market. It has also led many investors to capitalize on a vacation home or by second homeowners to cover costs, by renting it for short-term use. Many vacation destinations have put up rules, ordinances, and even bans on short-term rentals because of the harm it is doing to the housing crisis and to the community. This has led to some confusion over the differences between short-term rentals and Shared Ownerships, with them all being lumped into one- we don’t want this in our community- category.
Why is Shared Ownership Different?
A Shared Ownership arrangement (also know a Fractional Ownership) 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. Owners purchase a deeded share in a residence (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.
Fractional Ownerships differ greatly from the old-style Timeshares because owners of the ‘share’ are either deeded owners of the property or members of the LLC that owns the property. This also differs from short-term rentals which are properties owned by individuals or corporations who rent out their property by the day or week to vacationers who use the property. In some instances, property management companies handle the rentals and the renters, and in other instances the owners use a platform such as Air BNB and VRBO to advertise and book their property but must manage the property and the renters themselves.
Why You Want Shared Ownership Neighbors
- 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- they 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.
In vacation destinations the cost of homes has risen dramatically in the last decade. This rise has led many investors to capitalize on a vacation home or by second homeowners to cover costs, by renting for short-term use. Short-term rentals are hard on these communities because they are often poorly managed, overfilled, and taking rental properties away from long-term renters because of the higher price associated with them.
This is in direct contrast to Shared Ownership properties, which contribute to the community by allowing more homeowners to care for and maintain a single home, increasing usage and participation in the neighborhood and the community and by lowering the barrier of entry for those who wish to be a part of a vacation community.
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