Regina Orlando was able to give me some answers on the Fractionals relating to Vacation Rental Ownership. Copied from Old Republics information packet on Fractionals.
Fractionals have transformed the vacation ownership industry over recent years and are becoming increasingly popular alternatives to wholly – owned vacation homes. Fractionals attract consumers who can afford luxurious vacation homes, but can’t justify the cost and inconvenience of whole ownership when their use of the property is usually limited to only several weeks per year. Consumers are also drawn to the extensive amenities, five-star-hotel-like services , high-quality furnishings and finishes, desirable locations, exclusivity, and maintenance-free lifestyle offered by fractional projects.
While fractionals offer vacation home benefits at a fraction of the cost of owning an entire vacation home, the decision to purchase a fractional is signifigant. Fractional prices range from under $50,000.00 to several million dollars, depending on the size of the fractional and related accommodations, the location of the resort, and the degree of luxury provided. Consequently, the purchase of a fractional could prove to be a costly mistake unless you have sufficient information regarding a particular fractional project from asking the right questions of developers, salespersons, and yourself. The brief primer provides you with some of the basic information that you will need in order to evaluate fractional ownership and decide how to make and turn your purchase of a fractional a successful, cost-effective, and worry-free venture.
The Basics: Ownership Structure
Fractional ownership is and arrangement in which two to six individuals , or entities, hold shared legal title to a single parcel of real estate or a condominium unit. Each owner generally shares a fraction of the total ownership. This can range from a 1/2 share to 1/17 share. Every state has different rules and regulations on the minimum size of fraction. The size of the fraction a person owns , corresponds to the amount of the time that he/she is entitled to the use of the property. This arrangement allows those who might not otherwise be able to afford the resort lifestyle to do so by sharing the expense of ownership with others.
Purchase Price: Assesments and Dues
Fractional purchasers pay a one-time purchase price and yearly assessments that cover the expenses of operating and maintaining the fractional project. In some fractional projects , separate fees may be assessed for the use of certain amenities.
Financing
Although financing for the purchase of a deeded fractional interest is not nearly as prevalent as it is for the purchase of “whole” vacation homes, more and more lenders are treating the two purchases similarly for financing means. You should consult with your own tax attorney or economic consultant for advice.
Resales
Many people purchase fractionals for personal use, without any expectation of rental returns, appreciation, or other financial benefits. You can resell your fractional just like you can sell a wholly owned vacation home. Before purchasing a fractional, however, you should confirm the subsequent purchasers of your fractional would have the same use and rights and privileges that you would have as the original purchaser. You should determine the amount of any transfer fee, if any , that you or your purchaser must pay. The slowing real estate market and market saturation in certain locations may affect the resale potential of your fractional.
Accommodations
Fractional accommodations, usually condominium units, typically contain one to four bedrooms and are often equipped with high end furniture and finishes.
Rentals
Fractional purchasers may, or may not, have the opportunity to rent their reserved accommodations. You shouldconsult with a Real Estate professional for more details regarding the ability to rent your reserved accommodation.