Should You Consider Fractional Ownership of a Vacation Home?

If the cost were more or less the same, which would you rather own: a vacation home in the hills of Tuscany, or holiday digs in Aspen, the UK, Miami and Rio de Janeiro?

If you prefer the latter, you’re not alone.

A growing number of Americans - some in the Florida housing market among them - are following the lead of well-heeled Europeans and investing in fractional ownership of vacation property.

For the price of that Tuscan villa, you might own quarter shares in three or four other posh destinations.

“That’s exploding,” says Andy Sirkin, attorney and partner in Sirkin Paul Associates of San Francisco and Paris, which specializes in fractional ownership.

“Every week, we see a 10 to 20 percent increase in the number of calls.”

As a fractional owner, you actually become co-owner of a vacation property; you split the purchase price, maintenance and property tax costs with the co-owners, as well as the property’s appreciation down the road.

The advantages of fractional ownership are numerous:

- Investment diversification. You don’t have to bear the full financial burden of a holiday house you will likely only use a few weeks a year.

- Buying power. You may be able to buy a far more desirable property or in a better location than you could have afforded having to use a Florida mortgage by yourself.

- Location. With a do-it-yourself fractional, you’re not tied to properties on the tourist strip, and may opt instead to buy in a more desirable neighborhood.

- Culture cushion. Split the obstacles of setting up house in a foreign country among the group - or better yet, buy into an already established fractional in your country of choice.

- Growth. You can participate in the equity of the property’s likely appreciation.

- Control. You share power over the ownership and maintenance.

- Business expense. You can reward employees, woo clients and write off part of your fractional if you use it for business purposes as well as your own.

The disadvantages are few but can be significant. Though their number is growing with demand, it’s still relatively difficult to find a Florida mortgage lender willing to finance the purchase of a fractional.

Financial foibles can and will arise if you fail to carve the terms of your fractional in stone with the help of an attorney familiar with the nuances of this emerging field.

Follow our link to continue reading this Miami Herald article on the pros and cons of fractional ownership …