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.

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