Monday, October 7, 2013

Why Fractional Ownership makes Tremendous Financial Sense

This is the first of a series of blogs in which we will compare the long term financial costs of five common vacation alternatives:

  1. Purchasing a wholly owned cottage
  2. Renting a cottage
  3. Travelling with hotel-type stays
  4. Camping
  5. Fractional Ownership at Blue Water Acres

Purchasing a wholly owned cottage
Assume you are considering purchasing a lakeside cottage for about $500,000. This wouldn’t buy you much on one of the large Muskoka lakes such as Lake of Bays where the price of just the land could cost this much or more.
Your annual operating expenses are likely to be at least $13,000 per year after paying for realty taxes, utilities, insurance, maintenance, and other sundry items. Depending on how many weeks per year you use the cottage, your weekly costs look something like this.

Weeks used per year















Now, let’s assume you keep the cottage for 20 years and that your expenses increase for inflation by an average of 3% per year. After 20 years, you will have spent $349,315. Your average weekly cost over the 20 year span will look like this.

Weeks used per year















Briefly, how does this compare to Fractional Ownership at Blue Water Acres.  We will compare the same weekly cost in the first year and the average over a 20 year period for three cottage styles and prices each offering a 5 week interval. Maintenance fees includes all of the costs described in the wholly owned example, but it also pays for expenses related to a wide range of recreation amenities such as indoor pool and club house, housekeeping services and more.

Total Capital Cost




Maintenance Fees




Average Cost for 5 weeks




Assuming the same 3% inflation increase on the maintenance fees, your total cost over a 20 year period will be $67,176 for the $40,000 unit, $77,924 for the $79,000 unit, or $87,329 for the $97,000 unit. Your average weekly cost over the 20 year span will look like this.

Total Capital Cost




Number of Weeks used per year




Average Cost per week used









Historical data clearly shows that long term, an investment portfolio of stocks and bonds outperforms capital appreciation of real estate. The financial advantage of a fractional ownership purchase becomes even greater when one considers that the difference in the purchase price of a wholly owned cottage and a fractional ownership cottage is taken into consideration. The difference between the two options would be available to you to invest.  If you opted to finance your purchase with a loan or mortgage, the difference in the cost of interest paid over 20 years would be huge.

Financially, the difference in the amount it costs you for each week you use in a wholly owned cottage is extremely high compared to the cost of a week in a fractional cottage. Although it is reasonable to assume that both the wholly owned cottage and the fractional cottage will appreciate in value over the long term, it is interesting to note that even if the fractional cottage wasn’t worth anything after 20 years, the combined cost per week used on the total loss of the original investment using the most expensive example, is still less than the average weekly cost of wholly owned cottage.  Although the notion that the fractional cottage would be worth nothing at the end of 20 years is totally ridiculous, it still underscores the fact that owning a fractional cottage at Blue Water Acres makes more financial sense than owning a  wholly owned cottage.

One other financial consideration that we have not taken into account is the reality that buying an older cottage often costs more than the nominal amount we assumed for maintenance and repair. We’ve often heard cottage owners describe it as a “bottomless money pit”. No matter how much they spend fixing it up, it never seems to be enough. In contrast, a portion of the maintenance fees collected in the fractional ownership cottage is set aside in a reserve fund, to cover future replacement of such things as furnishings, roofs, equipment, etc. Further, an older resale of a wholly owned cottage is seldom built to the high standards and quality furnishings of the fractional cottages at Blue Water Acres

It is argued that owning your own cottage provides more flexibility on when you can use it. Some also suggest that there may be a greater pride of ownership. There is some truth to the first argument. Regarding the second however, those who are owners of a fractional ownership cottage also have a great deal of pride in their ownership. Many, who want more flexibility, simply buy a second or third five week interval giving them 10 or 15 weeks in total. The cost is still less than a wholly owned cottage. Others, simply trade their weeks with other owners.

One of the biggest complaints that we hear from those who have a wholly owned cottage is that they spend most of their time at the cottage working. There’s grass to cut, cleaning to do, repairs to make, equipment to fix. Owners of fractional cottages don’t have any of this. It is all done for them as part of their maintenance fees. From the moment they arrive they can put of their feet and relax.

The purchase of a fractional interval at Blue Water Acres also includes ownership of an indoor pool, club house with games and fitness room, safe sandy beach, non-motorized boats, docking for owner owned boats, tennis courts, skating rink, tubing hill and more. All of the expenses associated to operate these amenities are included in the maintenance fees. Have you ever tried to entertain young children or teenagers in a private cottage on rainy days?  Although most prefer a sunny day, there are still lots to do on a rainy day at Blue Water Acres.

Fractional owners at Blue Water Acres have one more major advantage to those with wholly owned cottage. They all have membership in an international exchange company. Feel like going elsewhere for a change instead of the cottage? Fractional owners can simply exchange one or more of their weeks for weeks elsewhere at luxury resort world-wide. An owner for example, can trade a November week for a February week in Florida in a luxury suite in a Marriott resort in Florida for a nominal exchange fee of about $125. The rate for a member of the travelling public would be thousands of dollars per week for comparable accommodations. Once such exchange is virtually worth the amount the fractional owner paid in maintenance fees for the entire year.

In our next blog, we’ll make the case that ownership in a fractional cottage at Blue Water Acres makes tremendous financial sense compared to renting a cottage.

Monday, December 13, 2010

Fractional Ownership is not Timeshare

Timeshare has been around for a long time as a form of vacation ownership. Although fractional ownership has also been around for a long time as a means of owning large luxury items such as yachts and jets, its popularity as it applies to vacation ownership properties is more recent. Millions own and enjoy the benefits of timeshare. Even more millions have been turned off by the high pressure tactics often employed in the timeshare industry during their presentations. Fractional ownership is an alternative to timeshare that offers many advantages. It is actually a smart alternative to whole ownership.

Timeshare is typically defined as the division of property rights into fractional interests based on time. In timeshare, the owner has rights over units of “time” rather than the underlying assets. Fractional ownership on the other hand, is co-ownership. The underlying assets which include the real estate, chattels and amenities are owned by a corporation whose members are the owners of fractional intervals. Each interval owner owns a share in this corporation. This difference offers the fractional owner some significant benefits.

Timeshare is sold at a huge premium to the underlying property value. The price of many fractional ownership developments bears a reasonable relationship with its underlying property value. This is partly because fractional ownerships are sold as fractions such as 1/12, 1/10, ¼ shares versus a week of timeshare.

The value of fractional intervals can appreciate over time, particularly as the value of the underlying real estate appreciates. Timeshares depreciate over time and often quite significantly. This is particularly true in those cases where the timeshare rights are for a specified number of years after which they revert back to the developer. The marketing and sales costs associated with timeshare are very high and can represent as much as 50% of the purchase price. These costs are generally much lower in the case of fractional ownership developments.

Fractional owners generally have control over matters such as rules and regulations, maintenance fees, etc. A Board of Directors made up of fractional owners is voted into office at Annual General meetings. The directors are bound by the bylaws and the owners’ agreement. These can only be changed by the membership as a whole based on ruled in the bylaws in effect. The Board of Directors must approve operations budgets and management fees. In most timeshare projects the fees can be arbitrarily set by a management company or developer. Management fees are more likely to be fair and reasonable if set by the interval owners themselves.

It should be noted that the information provided above are generalizations and that timeshare and fractional ownership structures may vary. As with the purchase of any product, potential buyers are advised to ensure that they deal with reputable and ethical developers. Compare values. Talk to owners who have already bought at the project.

Fractional Ownership at Blue Water Acres offers some of the following benefits:

  • Real detached lakeside cottages. Muskoka is affectionately known as “cottage country”. Blue Water Acres is cottage country.
  • Prime location on one of Muskoka’s most sought after lakes. Close to Huntsville and Algonquin Park.
  • Best fractional ownership value in Muskoka.
  • Lots of recreation amenities including indoor pool, tennis courts, beach and much more.
  • Carefree – no maintenance workExchange privileges.
  • Over 2500 resorts to choose from in more than 75 countries.
  • Ownership is in perpetuity. You can enjoy it for a lifetime. You can leave it to your heirs or sell it.

Established in 2008, the project is well on its way to completion. Twenty two new cottages have been built and more than 150 fractional intervals have been sold. It is no longer just a concept. It is a reality.

For more information, visit our website:

Thursday, November 25, 2010

A Smart Alternative to Whole Ownership

It’s November. It’s not a time when people typically go to their cottages on the lake. Most people have boarded up their cottages for the winter and won’t return until the Victoria Day Weekend. Traffic is light, shops are not crowded, and the lake looks deserted except for the wildlife that enjoy the peaceful serenity of their beautiful natural environment.

It is quiet and peaceful at Blue Water Acres too, but there is a difference. There are actually people around enjoying their cottages, the outdoors and their recreation facilities. There’s no reason to board up their cottage for the winter. There is simply too much to enjoy every season. That’s one of the many reasons they decided to purchase a fractional share at Blue Water Acres.

If you were to approach some of the people you’ll find at the resort in November, you’ may be surprised that they are not all fractional owners at Blue Water Acres. Some owners will actually be in Malta, Florida, or Hawaii this winter, enjoying the benefits of their cottage ownership in Muskoka there. You ask, “how is this possible”?

Fractional owners at Blue Water Acres have the facility to exchange one or more of the weeks they own in a cottage at Blue Water Acres for other weeks at more than 2400 resorts in more than 75 countries around the world. They simply deposit a week into the International Exchange program and pick another destination to visit. They may for example, deposit their November week at their home resort at Blue Water Acres and exchange into a Marriott resort in Hawaii in February. One of the more than 2 million members of the Exchange Network will have deposited their week at their home resort, and selected the week in November at Blue Water Acres to visit. This is the person you might meet instead of the actual owner.

Not all the owners at Blue Water Acres utilize the Exchange Program. Many want to use the cottage themselves every season. Many sold their private cottages on the lake in order to purchase one or more fractional ownership intervals at Blue Water Acres. They love Muskoka and the lifestyle of owning a cottage on the lake. However, what they didn't like about whole ownership was the cost of maintaining the cottage and the amount of work involved. They have to pay for the use of their cottage 52 weeks of the year even if they only use it only a few times. They also disliked the maintenance and repair work required each time they visited the cottage . They discovered that fractional ownership addressed these issues perfectly.

Here’s a summary of some of the benefits of Fractional Ownership versus Whole Ownership

• Fraction of the cost of whole ownership
• Fraction of the maintenance and operating costs
• No maintenance work. Simply enjoy yourself!
• Premiere location on one of Muskoka’s most popular lakes
• Detached luxury cottages
• Use of recreation facilities such as indoor pool, clubhouse, skating rink
and much more

For more information, call 1-800-461-4279 or visit our Website

      Sunday, August 29, 2010

      Stay at the Best Resorts for $500 per week

      I personally own 2 intervals at Blue Water Acres in Muskoka which gives me 10 weeks ownership. Blue Water Acres offers fractional ownership of detached 2 and 3 bedroom lakeside cottages on beautiful Lake of Bays at extremely competitive prices. I use most of these weeks to travel to resort destinations around the world. My maintenance fees for the 10 weeks adds up to about $5000 per year or $500 per week.

      Fractional ownership at the resort comes with a gold membership to Interval International which is one of the world's largest and most successful exchange companies. I am able to deposit any of my weeks (one or all if I want) and exchange them for weeks at other member resorts. There are over 1200 resorts in over 75 countries to choose from. Many are brand name resorts such as the Marriott's. Many of these resorts can cost as much as $400 per night or more. My exchanges have included destinations such as Florida, Aruba, Mexico, Vail Colorado, Radium Hot Springs in BC, Scotland, Malta, California, Arizona, and more. Most resorts where we've stayed are 5 star. Almost all of our accommodations are in 2 or 3 bedroom units with two full baths, and full kitchen.

      I concede that I must own a fractional cottage before I can take advantage of this great arrangement. However, I do not include the capital cost of my purchase into this equation. I am making the assumption that the value of my interval which is real estate based, will increase in value. As such I tend to treat it as an alternate form of investing my money to that of putting into bonds or stocks. All resales at Blue Water Acres to date have appreciated over the original purchase price. Besides, even if I only break even, it is at least an investment I can use and enjoy and that has to count for a lot.

      To be honest, I should have added the administrative fee paid to Interval International to make the exchanges. The cost of this is about $139 US per week. Even considering this, it's an absolutely fabulous deal. Here are several examples of resorts we've traded into.

      Most owners of course, prefer to stay at Blue Water Acres for most of their weeks, but it nice to have the option of trading one or more weeks and going elsewhere.

      Marriott Ocean Pointe, Palm Beach Shores, Florida
      Marriott Grande Vista, Orlando, Florida
      Raddison Golden Sands, Malta

      Wednesday, June 30, 2010

      The Laws of Attraction: fractional developments having positive impact on tourism in Muskoka

      Although fractional resort developments have been around for a few years now, the perception lingers that the “story” around this approach to vacation property ownership is more about real estate than tourism; that fractional developments are just another way to own a cottage. Truth is, fractional developments are helping to drive the tourism industry in Muskoka at a time when attracting people to the area is as challenging as it’s ever been.

      Since 2007, a number of economic events have conspired to drag down tourism numbers in Muskoka; the recession has pared back travel by Canadians, a strengthened dollar has meant fewer U.S. visitors and competition from other markets for those that are still travelling is stronger than ever. This has translated into fewer rooms booked at long-established resorts and less money in the local economy.

      However, it could have been worse. Just prior to the economic downturn, the concept of fractional developments was coming on-line in the area, providing an alternative to traditional cottage ownership. Many multi-generation lakefront resorts began to see that the future lay in redevelopment of their property, offering fractional intervals while simultaneously operating the resort component. The result has had a big impact on tourism in the area.

      “There’s no doubt it’s been a positive for tourism in Muskoka,” says industry leader Bill Van Gelder of Blue Water Acres (BWA) on the popular Lake of Bays. “Our new cottage-style fractional units are in use year-round, so we’re drawing people to the area during the shoulder seasons when traditionally it’s been very hard to attract anyone.”

      Van Gelder knows the Muskoka cycle of tourism well. Operating for decades as a traditional resort, BWA has seen the yearly peak from May 24 to Thanksgiving and then the long lull in between, save for a few weeks in the winter during snowmobile season.

      Finding a solution to this problem has been the Holy Grail of tourism operators since the area first became popular. Fractional ownership gives people time in all four seasons, time that is most often used by the owner but if not, gets turned back into a pool for BWA to rent out as part of their regular resort operations.

      “There is a misconception that once you’re a fractional resort, it’s for the owners and only the owners but that isn’t necessarily true,” says Van Gelder. “We have inventory for rent on behalf of owners that for whatever reason can’t use their time, meaning the travelling public can rent a stunning new cottage just about any time of year. It’s a great deal that people don’t know about and of course we’re still renting our traditional resort units too.”

      This multi-front approach has been good for the local economy around BWA. The village of Dwight, a few kilometres down the road, now sees more people coming in throughout the year to stock up on necessities for a week at the cottage, and Huntsville, the nearby major town benefits by having more people grace its restaurants and night-spots.

      While still one of the most popular areas in Canada for people to vacation, Muskoka continues to seek ways to be more than just a summer destination. It’s a goal that has drawn the attention of local government and tourism officials and continues to be a topic of debate among local operators. While it won’t happen overnight, the transformation has begun in part due to this private-sector initiative offering a new way to travel.

      Owning Paradise: Muskoka is becoming surprisingly affordable again...thanks to an invention for the rich

      Muskoka. This iconic cottage destination has been the place that allows imaginations to wander: lazy days reading on the dock, kids swimming to their hearts content, a barbecue while the sun sets over the lake after another perfect day.

      For years, this dream was a reality within reach for most. Post-war Muskoka saw an explosion in new cottage construction. Transport to the area became easier and the burgeoning Canadian economy allowed those who worked hard no matter what their vocation to save a few extra dollars and buy a slice of paradise. Their cottage was a place for the kids in the summertime and a retreat after working in the sweltering city.

      Fast-forward to today and that scenario is all but gone for the average family. As the reputation and popularity of Muskoka grew, so did the prices for even a small cottage, and as land became scarce on the major lakes families were forced to adjust, settling for a smaller lake, smaller cottage or more likely, abandoning the prospect of Muskoka and cottage ownership all together.

      So how does the average family afford any cottage in Muskoka today? Surprisingly, the answer has come from an ownership model developed for the rich to efficiently share private jets and luxury yachts. Fractional ownership has reinvigorated the marketplace for those who previously saw themselves as excluded from Muskoka (especially the major lakes), significantly altering price-points and availability. But even as this alternative is letting more people into the marketplace, one problem remains: many recreational properties in the region are condos, or high density fractional-ownership resorts, not cottages.

      For those that want the real Muskoka experience, “high density” just won’t do. Hear the word “Muskoka” and the mind’s eye does not conjure images of townhouse-style developments or a place bearing more than a passing resemblance to urban culture. It sees discrete cottages, green grass, and the water’s edge shimmering against a sandy shoreline.

      That mind’s eye image comes to life at a few select Muskoka developments, but none more so than at Blue Water Acres, a fractional resort on Lake of Bays whose mandate is to provide an option for those disenfranchised cottage-seekers. The property is stunning, with over 50 acres of prime waterfront property boasting traditional Muskoka geography leading to a shore area custom designed by Mother Nature for fun in the water; however, what has people talking, and buying, is the price.

      “We’ve consciously priced our units to attract those who figured Muskoka was off the table; that they would have to look somewhere else or settle for what they really didn’t want” says BWA’s developer and industry leader, Bill Van Gelder. “The response to this approach, offering the real cottage lifestyle on a major lake has been overwhelmingly positive.”

      The fractional approach may differ slightly from owning a cottage outright, but according to Van Gelder, the differences are all positive.

      “With fractional intervals you aren’t concerning yourself with maintenance issues, there are great amenities included and you can just show up and start having a good time. Even if you can afford to buy a cottage the old-way, there’s a lot of upkeep, like any home, which this type of ownership eliminates.”

      That said it is clear the market for stand-alone cottages in Muskoka isn’t going away. Rather, it’s now the domain of a select few who can afford prices starting on major lakes that are equivalent to purchasing a luxury home, even for a “fixer-upper”.

      “We’re literally allowing people to buy into a cottage for what prices were like in the 60’s and 70’s” says Van Gelder. “For that, you get five weeks per year in the location you want, in the style you want and we’ll even look after renting it out if you can’t make it. Hassle-free cottage living doesn’t begin to describe it.”

      Necessity being the mother of invention, it seems once again Muskoka is open for business to everyone now that fractional ownership is here to stay.

      Dream of cottage ownership found “alive, well and affordable” in Muskoka

      Despite the recent economic downturn, the dream of cottage ownership is very much alive and doing fine at Blue Water Acres (BWA) on Lake of Bays in Muskoka.

      In fact, it’s been doing more than fine since the fractional resort’s inception in 2007. A popular choice for savvy cottage-seekers, BWA is now offers five-week fractional intervals in two and three bedroom fully-detached cottages starting at only $34,900; decidedly more reasonable than other offerings in the Muskoka marketplace. But it’s not just a price-point that has made BWA such a success despite tumultuous markets in recent years.

      “Having a cottage is a goal for so many people,” says resort developer and industry leader Bill Van Gelder. “People saw that with fractionals, and BWA in particular, their dream was alive, well and affordable despite any problems with the larger economy. Now that things are turning around, we will attract a whole new set of those dreamers.”

      The growing demand isn’t only tied to an economy on the upswing. An equally important driver is the business model at BWA. Offering the full cottage experience plus amenities that most traditional property owners could only dream of, it’s perfect for people whose busy lifestyle demands a hassle-free, experience-rich escape.

      “It truly is the best of both worlds when you can walk out your front door and head to the beach, the nature trails or the tennis court and they’re only steps away,” remarks Van Gelder.
      The sought-after location, popular amenities and attractive price have resulted in 95% of phase one sold and 75% of phase two.

      Put another way, BWA has more sales than any other fractional development in Ontario with more than 145 intervals sold to date and more to come.