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Keep dreaming about those vacation homes

E-mail|Link|Comments (3) Posted by Stacey Myers October 28, 2008 11:17 AM

Many people dream about owning a vacation home, but for a large number of people it’s an expensive and unrealistic proposition. Some folks try to make vacation-home dreams come true by buying time shares, which grant them the use of a vacation property for a specific week or two each year. But time shares have their downsides, like the fact they can be hard to re-sell and may not offer much flexibility in the dates you can use the property.

In the Boston Globe Magazine this past Sunday, however, they wrote about another spin on buying vacation homes, fractional ownership.

Fractional ownership lets you buy a share of a property located in a vacation destination such as Bermuda or Deer Valley Resort in Park City, Utah, according to the magazine. Buyers are entitled to longer periods of time at the vacation site, from a couple of weeks to three months, and have more leeway in scheduling their time at the resort. However, the costs are high, with the average sales price running from $172,790 to $373,985 and maintenance fees averaging over $7,000 a year, according to the magazine. That’s compared with an average time share sale price of $19,216 and average maintenance fees of $550 per year.

But it seems fractional ownership targets people in a higher income bracket who are more pragmatic when it comes to spending their money, not your average person living paycheck to paycheck. (Looks like I’m going to have to keep dreaming about my vacation home along with a lot of others.)

There are also fewer fractional ownership resorts than time shares. The Cape Codder Resort in Hyannis is among the vacation resorts to start selling fractional ownership opportunities. Currently, the Cape Codder is selling fractional ownership in two-bedroom units for $149,000, but the Route 132 hotel’s owners expect the price to rise as they sell more units, the magazine reported.

Do you see any benefits to either fractional ownership or time shares, or are vacation homes just out of the budget picture for you?

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3 comments so far...

I have never understood the concept of timeshares.

So I plunk down thousands of dollars (let's say 20K) to 'purchase" the timeshare, and then that buys me the opportunity to use that property for a week per year, at a cost of say, 100/night?

I can book my own vacation at a condo in the same area for that price or lower, and I don't have to pay maintenance fees, or worry about scheduling or trading weeks, etc. What is the benefit/value of having a timeshare?

Posted by LL October 28, 08 11:45 AM

I don't see the difference between fractional ownership and time shares, frankly. Its just an attempt to re-brand the original concept. Though the article claimed they were different, it failed to point out how.

If analyzed purely as a consumption expense, fractional ownership can make sense, just like time shares can. If one is deluded into thinking there will be much of a resale market, one will be in for a rude surprise - the same issues apply as with time shares, as I said the article made a false distinction between the two.

Can I conceive of benefits? Sure, for people who'd like to vacation at the same place at the same time for a long time to come.

But to use the example in the article of the bermuda place, It would be reasonable to think that same 209k, if invested, would produce 4k in annual income (and in all likelihood costs more than 4k in note payments). Plus there is another 7200 maintenance, for at least a $11,000 annual vacation costs, without transportation.

That will get you a nice vacation just about anywhere, without being locked into a time or place. And is rather basic analysis the article should have done, frankly.

Posted by charles October 28, 08 01:24 PM

I would like to suggest that anyone looking into fractional ownership that also would like to understand the difference to timeshare, should pick up a copy of Where to Retire Magazine in stores Nov/Dec for a very thorough education.

We own timeshare from 20 years ago that we have exchanged all over the world and now enjoy the luxury of fractional ownership.

Posted by tch November 4, 08 02:36 PM