Time shares are out; fractionals are in

by Lisa Antonelli Bacon
for Virginia Business
April 2005

Time shares are out; fractionals are in

READER RESOURCES Related stories: • Second-home getaways • Expansions, renovations at resorts • Resort give manager chance to settle down Web Pointers: For more information • National Association of Realtors • Wintergreen Resort • Bay Creek Golf and Marina Resort

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Would you consider tapping the equity in your primary home to finance a second home? Yes No Undecided

Financing a second home and taking on a second mortgage can be daunting, particularly for people able to spend only limited amounts of time in their vacation retreats. Now there’s a way to own part of a vacation home, without many of the headaches. It’s called fractional ownership. This model lowers the cost of a second home significantly, and someone else does the maintenance. While some might consider it a cousin to the old time-share model — which touted luxury accommodations at international locations with no maintenance costs — fractionals are easier to resell.

Resort and hotel developers, such as Ritz-Carlton Hotel Co. and Four Seasons Hotels Inc., are offering full, family-sized houses on some of their resort properties at a fraction of the cost of full ownership. For instance, under the fractional ownership model, you can buy access — from a month to three months or more — for a one-time cost of a few hundred thousand.

At the Homestead Resort in Hot Springs, Homestead Realty has been handling a community of 33 homes — in which buyers can purchase a fractional interest — since 1998. Owners pay $133,000 for one 13th-deeded ownership of a house they can use 27 days a year. They also pay an annual maintenance fee of about $5,000. By 2003 when the houses were completed, all interests had been sold. Now they’re beginning to turn over. While many owners are Virginians, others come largely from surrounding states. “We draw mostly from within a six-hour drive,” says Beth Rogers, a licensed associate in the private residency club.

Some resort companies will let owners trade time at other locations. But don’t expect any greater availability than with time shares. You still have to call and request the place and dates you want, which you may or may not get.

Studios can start as low as $60,000, but expect to pay $1 million or more for bigger, cushier digs. Annual fees, which cover maintenance, can range from $450 to $15,000. But at least you’re not the one raking the leaves.