One Sixth of Paradise

So you dream of owning a vacation home but can't afford it? Buying just a fraction of a second home is an increasingly tantalizing option.

Ever since they first visited Bermuda on their honeymoon in 1996, Kevin and Peggy Farren of Quincy had dreamed of purchasing a second home there. "We'd go to other places and say, 'Oh, it's not like Bermuda,' " Peggy says while lounging in shorts and a sleeveless top in the tres chic living room of her new condo just across Hamilton Harbour from the nation's bustling capital. "We came down here time and again and really wanted to buy, but had ruled it out because the laws are so strict keeping foreigners from owning property."

Then, in April of last year, they heard about the little country's latest trend: fractional ownership. Think time share but with more time, more amenities, and more flexibility. A scaled-back second home for those who still have some savings left. "Fractionals provide a deeded interest in the suite of your choice at a higher-end resort," says Tim Petty, sales director of Newstead Belmont Hills Resort and Spa, where in February the Farrens closed on a one-sixth share in a 1,200-square-foot one-bedroom (and the strict laws against foreigners that they had feared didn't apply to them). "You can own a vacation home for much less than it would normally cost, but have none of the headaches associated with it."

Peggy, a school psychologist, and Kevin, a registered nurse, bought at a preconstruction price of $209,000, plus a monthly fee of $600 that covers amenities, maintenance, insurance, and taxes -- affordable because of the low mortgage on their primary home. For that they can spend eight weeks a year luxuriating in their water-view Jacuzzi, king-size bed, granite-and-stainless kitchen, and large, partially covered patio with gorgeous sunset views. They have daily housekeeping service, a concierge, access to a semi-private 18-hole golf course, spa, fitness center, tennis courts, and pool, and a free water shuttle to town -- amenities typical of fractional ownership. They're also steps from Beau Rivage, one of the best restaurants on the island. "We didn't come down that trip planning to buy," Peggy says. "It was impulsive, but impossible not to."

Fractional ownership is believed to have gotten its start in the early 1990s at the Deer Valley Resort in Park City, Utah. "I noticed that the majority of homeowners in Park City were only using their places four to six weeks a year," recalls Steve Dering, a founding partner at Deer Valley. "It dawned on me that there could be an opportunity for a new real estate product." Dering based his business model on the more restricted quarter-shares started in the early 1990s at a few ski resorts in the American West and on equity golf country clubs, in which a few hundred members own the course and clubhouse and are allowed unlimited use and unassigned tee times. "We thought we were creating Deer Valley for the average skiing household that could not afford whole ownership but wanted a vacation home," he says. "The big surprise was that almost every one of the 195 people who originally bought could have afforded whole ownership in the expensive condo across the street. They could afford it, but couldn't rationalize it."

Fractionals -- or private residence clubs, as the more expensive ones are often called -- are, of course, less expensive than whole ownership, but you still get a deed to the property. Bill Catania, developer of the Cape Codder Resort in Hyannis, another fractional ownership property, notes that this kind of second home is also less wasteful than whole ownership, as you're buying only what you're using. "We have 150 fractionals, as opposed to 150 houses, so they take up less resources, land, and green space," he says.

Fractionals have advantages over time shares; a big one is they are considered a true real estate product that should hold its value or perhaps even appreciate (time shares typically lose value) and be easier to resell than time shares. And buyers say the sales pitch for fractionals is more appealing; both the Farrens and Francisco DaFonte, a Milford utility-company director who recently bought a two-bedroom at the Cape Codder with his fiancee, compare the sales pitch for time shares to being approached by a used-car salesman. "Typically they get you down there and want you to make the decision in one day," says DaFonte, who also has a time share in Orlando. "At the Cape Codder, they weren't trying to push me into making a rash decision."

Of course, a drawback of fractionals over whole ownership is you don't always get to visit when you want and you may have to become a more organized vacation planner. Most fractional resorts operate under one of two programs, with variations. The first, used at Newstead in Bermuda, gives owners two weeks each season on a rotating schedule, but they can also book up to four weeks at a time if space is available. When owners choose not to use their suite, it's rented out at market rate and they get a 40 percent return on the rental fees. In the second scheme, in use at the Cape Codder, owners are asked to choose certain weeks, maybe three out of the five they've purchased, for their "planned vacations." Often these weeks can be stacked, meaning instead of booking three separate weeks at your suite, you can book your suite and two comparable suites at the resort for the same seven-day period, so you can vacation with relatives or friends. Owners can then use their remaining two weeks on shorter notice and are free to use the resort in addition to their five weeks, as space is available.

This flexibility, say developers, is part of the appeal of fractionals. "There are 76 million baby boomers out there right now between 42 and 62," says Howard Nusbaum, head of the Washington, D.C.-based American Resort Development Association. "They've got more free time than ever before, and their biggest goal is to experience life. Their idea of retirement is not a rocking chair. And they understand pizza by the slice."

And for those who think gourmet pizza by the slice may be a little too rich for their blood, there's good news: As the concept becomes better known and more resorts start developing fractionals, the greater number of options will inevitably mean a wider range of prices. Even now, the earlier in the process you buy, the better a deal you're going to get; two-bedrooms at the Cape Codder, for example, are currently on the market for $149,900 but the price will increase as more units sell.

But to some, it seems, owning a slice of their favorite vacation destination is, like the ad says, priceless.

"They say there's a vortex in Sedona, but you really feel something here in Bermuda, too. It's the boneless-chicken feeling," Peggy Farren says, sinking into her cushy overstuffed couch. "Boston's just two hours away, the island's beautiful, and the people are as nice as they seem. Yes, it's worth it. It's definitely worth it."