A Brief History of Fractionals & Private Residence Clubs

In 1994, a new concept debuted in the United States — fractional ownership of vacation homes. The concept formalized the idea of a group of relatives or buddies pooling their resources to buy a getaway place.

Now, fractional ownership is rapidly growing as an alternative to full ownership of vacation homes. It makes a high-end home in a place where real estate is extremely expensive (like Miami Beach and Aspen) more affordable, and owners get to enjoy a place that’s more like home with all its space and conveniences and less like a hotel room.

Fractional ownership of vacation homes allows the owner to enjoy four to 12 weeks of home ownership privileges per year at an upscale, luxury resort. The cost is a fraction of that of complete ownership.

Fractional ownership divides the ownership into fourths, eighths, or 13ths. Each owner has an equal number of days a year to use the unit. The owners buy their shares from a management company, which handles maintenance and schedules owner visits.

The fractional vacation home has evolved within the last few years to become a private residential club — an ultra-luxurious home complete with resort amenities and services.

Get a Piece of Your Dream Vacation Home

A second home is a discretionary purchase. People who are fortunate to own a second home at the beach, the lake, or in the mountains are quick to express frustration at spending the kind of money to purchase and upkeep a second home and not having the ability to spend more time there. It doesn’t make sense to have the expense of a mortgage, upkeep, insurance, and taxes for a home used a mere couple of weeks out of the year.

Fractional ownership in a private residence club offers individuals the opportunity to buy partial ownership of a luxury home in a resort area.

How about an oceanfront house or an island property in the Caribbean with resort-style amenities including on-site restaurants, fitness clubs, golf courses and a concierge service?

Incredible Amenities

Most fractional ownership clubs offer extensive amenities. These may include an extravagant clubhouse and spa, plus five-star hotel services, the kind you couldn’t expect to have in a wholly-owned vacation home, high-end condo, or timeshare.

Imagine this: You are going on vacation and you call ahead to the staff at your fractional ownership home. At your request, the staff shops for your groceries, dry-cleans your clothing, makes your restaurant reservations, heats your private splash pool, and places knick-knacks and favorite pictures of family members around your residence. You are met at the airport by a staff person who shuttles you to your home where a just-detailed Jaguar is sitting in your parking space for use at your disposal.

Get the picture? Private residence clubs are not your ordinary second home. Amenities may include:

• Pools
• Whirlpool Tubs
• Barbecue Areas
• Fitness Centers
• Club Houses
• Private Beaches
• Car Use
• Bicycle Use
• Transportation
• Daily maid service
• Concierge
• Interior and exterior maintenance

Other benefits at private residence clubs include:

• Outstanding Locations
• Top of the Line Management
• Hassle-free Ownership

How Do Private Residence Clubs Compare with Timeshares?

Private residence clubs are larger and include more luxury amenities than timeshares. Owners can only use their timeshares for one to two weeks per year. Private residence clubs/fractional ownership offer anywhere from two to 13 weeks of use that don’t have to be consecutive. Owners can pick the weeks they want, and those weeks can vary each year.

Private residence clubs tend to cost significantly more than timeshares. However, they appreciate at a greater value than timeshares because they typically offer more amenities. Remember, these are ultra-luxurious homes. Also, less money goes to sales commissions than with a timeshare.

With timeshares, sales commission can be as high as 40%-50%. Furthermore, there is a large number of timeshare resales on the market at any given time and a continuous stream of new developments. In contrast, there are very few private residence clubs on the market. When demand is greater than the supply, the result is an appreciation in the value of the property.

Financing a private residence club purchase is easier than for a timeshare. Rates for timeshares are higher because historically their value tends to depreciate over time. Not so with private residence clubs. Mortgage firms typically treat private residence clubs like any other second-home purchase.

Comparison of Private Residence Clubs to Condo Hotels

Both private residence clubs and condo hotels are typically high quality, offering numerous luxuries and amenities. Condo hotels are actually condos located within hotels. Owners have whole ownership of their condo. They can use their home when they want and place it in the hotel’s rental program when they’re not in residence. They share in the revenue their unit generates.

Private residence clubs do not usually offer rental programs. Condo hotels are usually oversized hotel rooms with kitchen facilities. They are located in large, high-rise buildings. Most private residence clubs offer homes that are comparable in size and features to a large single-family home.

Appreciation Potential

To date there have been relatively few private residence club developments and those that exist or are being built are located on prime real estate.

According to real estate experts, product demand is high, and the outlook for investment appreciation in fractional ownership properties appears excellent. They say buyers can expect an appreciation rate parallel to any other resort area real estate.

See what fractionals are currently available  here.