Fractional Home Ownership: A Smarter Investment or Real Estate Game Changer?
If you’re in the market for a second home, a vacation retreat, or a pied-à-terre, you may have come across the emerging trend of “fractional home ownership.” While it may initially sound like an updated version of timeshares, it’s an entirely different concept.
Fractional home ownership involves multiple individuals or entities collectively owning and sharing rights to a single property.
Whitney Curry, Chief Marketing Officer of Pacaso, a marketplace offering co-ownership opportunities in various locations, explains, “Co-ownership allows people to tailor their ownership to match their actual usage, unlike traditional vacation homes that sit idle for most of the year.”
But is fractional home ownership a wise investment or a potential regret in the long run? Here’s a closer look at this real estate trend.
- Not a Timeshare
- Description: Fractional home ownership may resemble timeshares in providing access to real estate for a set amount of time annually, but that’s where the similarities end. Unlike timeshares, fractional home ownership involves owning a real estate asset rather than a liability. Timeshares offer the right to use time in a group of properties, often with fixed usage dates and limited resale value.
- Benefits of Fractional Home Ownership
- Description: Fractional ownership offers a mix of affordability and flexibility for those seeking a vacation home or pied-à-terre. It’s typically more cost-effective than sole ownership, as it involves sharing expenses. Some fractional arrangements even permit owners to list their time on short-term rental platforms, generating income.
- Costs and Maintenance Benefits
- Description: One significant advantage of fractional ownership is sharing renovation, furniture, and essential expenses with co-owners. Companies like Pacaso provide fully furnished homes with professional interior design and manage properties, including bookings, cleaning, and maintenance, making ownership hassle-free.
- Downsides of Fractional Home Ownership
- Description: While fractional ownership has its merits, it also presents challenges. Co-owners may encounter conflicts over visiting dates and decisions regarding renovations. Selling a fractional interest can be more challenging due to the smaller buyer pool, making it a niche market. Financing can also be tricky, with banks often hesitant to lend against fractional properties.
- Unique Aspects of Pacaso
- Description: Pacaso stands out by partnering with banks, allowing qualified buyers to finance up to 70 percent of the cost. Shares can even be purchased with cryptocurrency, expanding the potential buyer pool. However, it’s essential to note that some cities, like Newport Beach, California, are considering banning fractional ownership arrangements.
In summary, fractional home ownership offers an alternative path to owning a vacation home, combining affordability and flexibility with some potential downsides.
If you’re willing to share responsibilities and take calculated risks, fractional ownership might open doors to your dream vacation home that would otherwise be out of reach.