Fractional Ownership [Property]

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diehard
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Fractional Ownership [Property]

Post by diehard » Sun Aug 30, 2015 7:38 pm

I have been considering purchasing a fractional ownership interest in a property in a popular Colorado mountain (ski) town. Here is the deal: $365,000 buys you a deed to the property and guarantees 4 weeks to use the specific property which is located in a 5 star hotel in the middle of the ski village. The residences are 3 bedroom, luxury condo usually but there are a few 2 and 4 bedroom condos also. Along with that you get underground parking which is at a premium, storage space for skis, bikes etc. immediately behind the gondola (within walking distance of the hotel) and the ability to get a 5th week of time each year at no additional charge. Two of the weeks can be banked to use within 2 years of their deposit or used at one of 13 other properties located in various places around the world but mostly in Colorado owned by the mother organization. In addition, short term usage of a residence on a space available basis is free except for housekeeping charges of $240/visit for 4 days. I forgot to mention yearly dues of $13,700 are payable annually. The hotel is perfectly located and has first class decor. The beds are fantastic as well. There is a restaurant, bar, spa, pool, work-out room, library, business center and 4 hot tubs. The price and dues include everything including taxes and re-modelling/upgrading the residences every 6 (I think) years.

That is roughly it. There are some issues like the garage is still owned by the developer of the property and that the developer appears to be able to eject the board of the Homeowners Association. In addition, there are some owners who have special status as they have grandfather rights to certain times (New Years). Finally, the contract is clearly written to favor the General Partner in the property.

Has anyone had experience with fractional ownership of a property? I would love to hear your thoughts.

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Re: Fractional Ownership

Post by niceguy7376 » Sun Aug 30, 2015 8:05 pm

You pay 365K once and 13.7K per year to essentially get 4 weeks of a 3 bed condo. What are the regular prices for a two week high season and two weeks edges of season cost for similar type of accommodation?

Is this not what used to be call time share?

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pondering
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Re: Fractional Ownership

Post by pondering » Sun Aug 30, 2015 8:37 pm

How much could the ownership be sold for in 5 to 10 years?
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Re: Fractional Ownership [Property]

Post by LadyGeek » Sun Aug 30, 2015 8:44 pm

This thread is now in the Personal Finance (Not Investing) forum (property). I also retitled the thread.

diehard - You also had a duplicate post, which I removed. There were no replies.
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Re: Fractional Ownership [Property]

Post by Dale_G » Sun Aug 30, 2015 8:51 pm

I am sure this is a wonderful property. But have you looked at the timeshare resale market???? It looks like a lot of people want to get out of their "deal" for 10 cents on the dollar - or even pay to get rid of them.

Go in with your eyes open.

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diehard
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Re: Fractional Ownership [Property]

Post by diehard » Sun Aug 30, 2015 8:54 pm

A similar rental would cost $1,800 to $2,200/ night. I do not know what the property would be worth in 5 to 10 years - that is really an unknown. The price has gone up by $10,000 in the last month but the seller controls the price completely.

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Re: Fractional Ownership [Property]

Post by Dale_G » Sun Aug 30, 2015 9:39 pm

I repeat the question - have you looked at the timeshare resale market? You should really do that.

Pick your town or resort and search for timeshare resales. "Fancy" properties with prestige names often go begging, especially when there are yearly dues.

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Rob5TCP
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Re: Fractional Ownership [Property]

Post by Rob5TCP » Sun Aug 30, 2015 9:43 pm

Fractional ownership is the preferred marketing term for timeshare.
If you intend to use this year after year, management has a long stable record, and you don't mind that it MIGHT have minimal resale value --
this might be worthwhile for you.
I have seen too many timeshares, that seemed wonderful on paper, turn out to be a dud when people decided (years later) to sell.
If they got their money's worth while they used it; then it wasn't a loss to them.. otherwise
If resale concerns you, you might check to see if similar sites have decent resale values. Because the sales commissions are so high and the incentives to get people down are high; front end costs are quite high.

WhyNotUs
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Re: Fractional Ownership [Property]

Post by WhyNotUs » Sun Aug 30, 2015 11:19 pm

I have worked professionally on the product but not owned a share as I am not the target market. The higher end of fractional market is competitive for people would would otherwise be buying a property in the area. That is the scenario in which it makes the most sense- a person who is dedicated to that particular locale and would otherwise purchase a property for several times the value and would have similar or higher annual maintenance costs.

If you are not in that group, then it will probably not pencil and should keep renting.

Resale is an unknown and is largely dependent on the ability of someone else to get a similar project approved and built. Financing for fractions can be tough so many sales are cash. That reduces the pool of potential buyers.

The notes that you made about the garage, preferred sales, and the annual fees are things that I would learn quite a bit about and perhaps negotiate. Fractional sales are not particularly hot still and buyers should have some leverage.

FInally, as others have noted, if you are not in a hurry you can wait and work the resale market in the future. The smallish pool of resale buyers can work to your advantage in that scenario.
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pondering
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Re: Fractional Ownership [Property]

Post by pondering » Sun Aug 30, 2015 11:49 pm

Why not take a vacation to your second favorite place to visit this year, and look at the resales available in both markets the following year? Or try another place the year after and then figure out which is the best among three options?
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unclescrooge
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Re: Fractional Ownership [Property]

Post by unclescrooge » Mon Aug 31, 2015 12:19 am

So you're buying a 1/13th interest in a $4.75 MM condo.

Must be one mind-blowing condo! Please post some pictures.

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Re: Fractional Ownership [Property]

Post by German Expat » Mon Aug 31, 2015 1:05 am

I have friends who bought a similar condo in Colorado (part of a 5 star hotel), pricing looked about the same, their yearly fee is even higher. Really nice place and they do enjoy it when they can go. But situations change, they moved from Colorado back to the East Coast and now go maybe twice a year. The other weeks they try to rent out and this usually works out to pay for the maintenance fee. They can't really sell it so are more or less stuck with it and make the best out of it. Flying in from the East Coast though can be quite expensive.
They do have 2 children and as long as the kids go along it works quite well for them. What

It is a bad financial decision though and we had years where they went with us to Steamboat rather then going to their resort because the school holidays week did not work out (you can pick your weeks but the priorities who gets the first pick change each year). With school aged children your options are not that great and when your kids get older you won't need multiple bed rooms anymore.

Personally I rather rent either via VRBO or stay at a hotel because it gives us more flexibility. We looked a couple years ago in Steamboat at a higher end property near the Gondola as well but then decided we won't go often enough to make it worth our while. On the other hand after we moved to Switzerland there is quite a lot of people here who own a condo in the mountains and go close to every weekend, we also had friends in Colorado that went every other weekend and stayed from Friday to Sunday. Also if you ski most of the time you won't need that high end a property, obviously being able to ski in and ski out is great.

In summary I would say it is not a good financial decision so probably the wrong forum here to ask that question. It could work out for you if you either use all 4 weeks or can rent it out at least part of the time to make up for the fee. But ask yourself would you pay 7.5k per week 4x per year to go into the mountains? I am already struggling a bit to pay 6k for our upcoming stay near St. Moritz for 1 week in February (and this includes breakfast and dinner, at your place you either have to go out or cook yourself).

Personally I would not do it but can understand why you are tempted. I was very tempted during a great ski vacation in Steamboat and did a lot of research afterwards. My strategy to let any itch sit for a couple weeks or month and then see if I would still do it avoided us making a mistake (we moved out of Colorado to Switzerland and would now be stuck).

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Re: Fractional Ownership [Property]

Post by ERguy101 » Mon Aug 31, 2015 1:32 am

Yikes. That's more expensive than my house, and I know my house is better than the vast majority of houses! We just planned a five day trip to thr Caribbean, staying at Mary's Boon in Sint Maarten, and we spent around $2300 for flight and hotel. Just your annual fees would pay for ultimate great vacations per year.

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Re: Fractional Ownership [Property]

Post by WallyBird » Mon Aug 31, 2015 9:44 am

Nirav wrote:So you're buying a 1/13th interest in a $4.75 MM condo.
Maybe not quite that bad, or quite that good. The value of a week in a ski condo is probably highest in late December, and still pretty high thru March. Most resorts in the Rockies are done by mid April. So there's a maximum of 4 months of high-value time. The remainder of the year is off-season-- not necessarily a bad time to be in the mountains, just not a particularly expensive time.

Another poster notes that these things used to be called "timeshares." Now that timeshares have a bad reputation, they're calling them "fractional ownership." The idea is the same, and more importantly, the heavy handed sales gimmicks are the same.

OP: Ask yourself these questions:

1. Why do they have to use such strong-arm tactics if these things are such great deals? Thrilled timeshare owners are scarce. Remorseful buyers are the norm, and the secondary market often amounts to "take over payments."

2. What would it cost you to rent a comparable condo this coming season?

3. Whistler's one resort where owners usually buy the condo outright and have the mgmt co rent it out when the owner doesn't need it. A friend of mine has a condo in Mexico with a similar deal. Would such an arrangement work for you?
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Re: Fractional Ownership [Property]

Post by mholdi1540 » Mon Aug 31, 2015 10:00 am

Yes, I have and DON'T DO IT !! I recently sold my time share property after 13 years at The Crane Beach in Barbados on the secondary market. There are literally thousands of properties up for sell each year. It generally occurs because of the ever increasing yearly maintance fees. Also, when you try to resell do not expect more than a 25% offer of what you paid at best and probably waiting for 1 - 2 years. If it was anything like RCI they advertize 4,000 places to go to but they are very difficult to get into with some like in Bermuda have a 5 year waiting list ( the property owners leave that little part out). And others with limited number of condo's at the sites such that they sell out quickly if you can not act imediately to an offer ( they leave that little part out too). If you have that type of $$ to spend, I would suggest just pick a nice hotel in the area you want to stay (just like I do now) and pay the fee and get it over without the yearly $13K fee. The yearly maintance fee will always go up and up and up. I am sure the property owners told you how good an investment it would be with great resale in the future - don' believe it for I have already been through it. If you feel you just can not live without a condo, then check out the purchase on the secondary market at "...sellmytimesharenow.net " I really feel these people make more $ charging advertizing fees than actually selling the unwanted properties. Of your $365k you want spend, if you paid for a nice hotel (where you like instead of being stuck at the same place all the time) say $20,000 for a month then you would have 18 years worth of nice month long vacations and no tacked on $13,000 yearly fee garuanteed to only increase every year. Heck, your yearly $13,000 fee alone should buy you at least a 2-3 week vacation at the greatest hotels anywhere in Colorado (or world wide). So that't my experience. If you want to talk further you can contact me !! Good Luck and think over before you sign on the dotted line...

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Re: Fractional Ownership [Property]

Post by archii » Mon Aug 31, 2015 10:34 am

How's the skiing there? Don't forget that important aspect :mrgreen:
I live near telluride, colorado. I've known a number of people who have had timeshares. For a while they enjoy it. Once they realized they wanted out, they found it difficult to unload the ownership. Then, that 14K year annual fee became a boat anchor. It's a cheap way (relatively) to have ownership you may otherwise never be able to afford. But I would be very concerned with asset appreciation, and the liquidity of the unit when you reach the point you want to sell. And you will reach that point.

Just think of how much that (invested) $365K will buy in comparable 4 or 5 star hotels.

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Re: Fractional Ownership [Property]

Post by powermega » Mon Aug 31, 2015 10:39 am

DW and I bought a quartershare of a condo in Keystone, CO last year. We have been very happy with it and love getting up there. We have two young children, so this is a very good fit for us. For us, a quartershare is perfect since we wouldn't be able to get up there more than once a month anyway. We conduct a draft of weeks once a year, so that is how time is divided. Personally, I really like the draft, and it is pretty unique in this market. Most fractional shares have a pretty ridged schedule that is already determined for years in advance.

What you described is something more of a timeshare than a true fractional share. True fractional share properties are rarely divided more than into fourths, and they are considerably more liquid in a resale market. That said, you should keep in mind that the buyers in this market are pretty scarce since there is no easy way to get financing, so virtually everyone must pay cash. While it might take a year listing a quartershare to sell it, timeshares are virtually impossible to sell, even at huge discounts.

Send me a private message if you would like to chat some more about all this.
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Re: Fractional Ownership [Property]

Post by SimonJester » Mon Aug 31, 2015 11:49 am

Dont do it, global warming is going to wipe out the ski industry anyways. :twisted:

As others have said for that yearly maintenance fee alone you could have a very good vacation and go anywhere.

Funny story my grandfather owned an entire city block in what is now downtown Aspen CO. He let it go back to the county over the taxes... This was of course pre world war II, OOps!
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Re: Fractional Ownership [Property]

Post by skepticalobserver » Mon Aug 31, 2015 8:36 pm

Here are some sobering thoughts on fractional ownership: http://www.timesharetrap.com/fractional-ownership.html

What you've described sounds like a souped-up ball and chain timeshare (salesmen call 'em "UFOs" --You Friggin' Own It!).

$365,000 buy a lot of Chinese dinners and many years of fine vacationing with no strings attached.

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Re: Fractional Ownership [Property]

Post by ThankYouJack » Tue Sep 01, 2015 2:47 pm

diehard wrote:A similar rental would cost $1,800 to $2,200/ night. I do not know what the property would be worth in 5 to 10 years - that is really an unknown. The price has gone up by $10,000 in the last month but the seller controls the price completely.
Why not just rent and have a lot more flexibility and a lot less hassle?

The numbers will be close to the same (when you factor in opportunity cost of the $365k), and you may even come out way ahead considering how most(?) timeshares seem to depreciate.

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Re: Fractional Ownership [Property]

Post by JeffAL » Tue Sep 01, 2015 6:11 pm

I only see downsides to time shares.

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Re: Fractional Ownership [Property]

Post by renue74 » Tue Sep 01, 2015 6:23 pm

I liken fractional ownership and timeshares with 2nd homes, boats, and campers.

They sound good at a certain period in our life. We've enjoyed the experience in the past and want to continue to experience it, but as all things, the newness wears off and life goes on.

About 5 years ago, I bought a 23' sailboat and loved it...I love the water. But life gets in the way and slowly I manage to make more excuses why I can't go sailing than why I can. Life goes on.

With fractional ownership, timeshares, etc. I could foresee schedules getting in the way and unexpected expenses. Plus, the "newness," will wear off.

While you may enjoy skiing in this area now, wouldn't it be great to use the money you would here to travel the world and ski at premier locations. That's a huge investment into something that's not very liquid.

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Re: Fractional Ownership [Property]

Post by denovo » Tue Sep 01, 2015 6:26 pm

Oh, thanks for me keeping me updated. It looks like the scammers realized timeshare had a deserved bad reputation so they're trying to rebrand themselves.
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dbCooperAir
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Re: Fractional Ownership [Property]

Post by dbCooperAir » Tue Sep 01, 2015 8:47 pm

All I can say, be sure you have a exit plan. And for the love of god don't add any kids to the title :annoyed
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Re: Fractional Ownership [Property]

Post by clemrick » Thu Sep 03, 2015 11:33 am

By my calculation, it will take you almost 8 years of using your unit 4 weeks/year to break even assuming the top cost of $2.2K/night and that the maintenance cost remains where is it.

That is a longish amount of time and depending on your situation, it could take up all of your vacation time each year, so you couldn't go anywhere else, unless you are lucky and can get weeks at other timeshares. That is a true commitment or else it is a waste of money.

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diehard
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Re: Fractional Ownership [Property]

Post by diehard » Fri May 18, 2018 6:18 pm

Thanks for the follow-up from a post over 2 years old! After considerable deliberation, I chose to go with the general consensus of the responses I received here and walked away from the purchase. Instead, I concentrated on East Vail four miles East of the Village and became educated about the market. When a townhouse that I liked became available, I bought it in one day. Now I own a 2,350 sq. ft., 3 bedroom townhome on Gore Creek. It has been completely re-done with high end finishes and has 2 large living areas, a sauna and a new garage. It is on a convenient bus line to the slopes. Most of all though is that it is 100% mine to use as much as I want. While I did pay top dollar for the place, it turns out the market went up immediately after my purchase and my portfolio is larger today than back then and I own a substantial piece of real estate too.

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diehard
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Re: Fractional Ownership [Property]

Post by diehard » Mon May 21, 2018 2:47 pm

We use it almost every weekend in the summer and most weekends during ski season. In addition, my adult children have used it to host friends multiple times in the past year and my brother brought his family out for a week to use it. All in all, I love this place. The drawbacks include a longer drive than it was to my previous mountain property in Summit County, there is no sailing like there was on Lake Dillon and the biking is very limited compared to our previous location (these activities can be had on the drive up from Denver). But, culturally Vail/Beaver Creek cannot be beat, the mountain is good/great (on powder days), the restaurants are fabulous and there is good hiking. I do not have to do anything with plowing etc. as the maintenance is done by the homeowners association. And, we have a community! I think the purchase was a great lifestyle move as we have many friends who have second homes there who have been very inviting. And, I don't think I'll lose money on the deal.

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Re: Fractional Ownership [Property]

Post by f35phixer » Mon May 21, 2018 3:10 pm

just got back from Maui, went to fractional sales pitch just to get the 25000 SPG points. Said no, but we did get suckered in to go back within two years to see if we changed out minds ~ 3000 for 8 days and we'll get another 25K points ;-))

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Re: Fractional Ownership [Property]

Post by SRenaeP » Mon May 21, 2018 3:21 pm

f35phixer wrote:
Mon May 21, 2018 3:10 pm
just got back from Maui, went to fractional sales pitch just to get the 25000 SPG points. Said no, but we did get suckered in to go back within two years to see if we changed out minds ~ 3000 for 8 days and we'll get another 25K points ;-))
$3000 for eight days at an SPG property in Maui?! That seems more like retail price than a deal...

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Re: Fractional Ownership [Property]

Post by adamthesmythe » Mon May 21, 2018 3:27 pm

They say that timeshares are not as bad a deal as they used to be. That would be a good thing because in the past many were a rotten deal.

The problem was that they were extremely difficult to get out of. They were the gift that kept on taking.

So think about it very carefully. And as noted, don't put kids on the title. Sometimes people have to be reminded that you do not HAVE to accept a gift or bequest of a time-share, and in many cases it is advisable not to.

SouthernCPA
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Re: Fractional Ownership [Property]

Post by SouthernCPA » Mon May 21, 2018 4:59 pm

Timeshares are great for the developers, but that's about it. I'd either rent and have options each year or fully own the unit myself and have access whenever I wanted (and control of the property).

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Re: Fractional Ownership [Property]

Post by FoolStreet » Sun Jun 17, 2018 1:20 am

SRenaeP wrote:
Mon May 21, 2018 3:21 pm
f35phixer wrote:
Mon May 21, 2018 3:10 pm
just got back from Maui, went to fractional sales pitch just to get the 25000 SPG points. Said no, but we did get suckered in to go back within two years to see if we changed out minds ~ 3000 for 8 days and we'll get another 25K points ;-))
$3000 for eight days at an SPG property in Maui?! That seems more like retail price than a deal...
No, that’s fair. It’s about maintenance fees. I assume that is the 2bedroom lockout. Picking the right dates may be tough, if not done 8 months in advance.

The point is to spend your maintenance fees on a rental, which will take 30 years to make up for the upfront cost, so why bother. Only if the location is so premium that you can’t rent it but must have it.

cp73
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Re: Fractional Ownership [Property]

Post by cp73 » Sun Jun 17, 2018 10:54 pm

diehard wrote:
Mon May 21, 2018 2:47 pm
And, I don't think I'll lose money on the deal.
Great job...glad you walked away from the FO. Sounds like you got a good piece of real estate. What did you end up paying for it and whats it worth today?

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diehard
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Re: Fractional Ownership [Property]

Post by diehard » Mon Jun 18, 2018 8:35 am

$1.1 M purchased about 1 yr. ago. It is likely worth that or a bit more. We use it regularly and my adult children are using it too. Association fees are about half of the fees for FO property. I feel as though I made the right choice.

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