Fractional Ownership: 9 Reasons Why You Should Look Into It
Fractional ownership is exactly what the name describes. It’s an ownership structure where several people agree to share in the costs, risks, usage, and returns of an asset – in our case, luxury vacation homes in Belize – in order to reap the benefits of something that may have been too cost prohibitive or time intensive to purchase. In the case of a vacation home, there are several benefits to fractional ownership that make it very different from a timeshare and very attractive to buyers.
Reasons For Fractional Ownership
Fractional ownership is a straightforward model for buying vacation homes. The benefits of fractional ownership are enough to motivate many potential vacation homeowners to take the plunge and buy a property. Here’s why:
Reason #1: Fractional Ownership Is More Affordable
Would you rather buy a beach house for $150,000 or $1,500,000? It probably depends on the house, right? Well, what if you could buy a $1,500,000 beach home for $150,000? That’s how fractional ownership works. For $150,000, you can buy 10% ownership in a luxury beach home worth $1,500,000. Why buy an inexpensive condo ¼ mile from the beach when you can one a property in an amazing location, like on a private island off the coast of Belize. In areas of southern Belize, like Placencia, property values are still relatively low and affordable. However, the area is a growing attraction for tourists and retirees alike, meaning property values will more and more over the next 5-10 years.
Reason #2: Fractional Ownership Spreads the Costs Around
Vacation homes require upkeep and maintenance no matter where they are located. However, these costs are often overlooked by vacation home buyers. And investors looking to make money on their vacation home must remember to account for the annual costs that can eat into the investment returns. This is why fractional ownership is often a wise choice for vacation home buyers. Routine costs like cleaning, repairs, taxes, and property management can are significantly reduced when split 10 ways. Plus, a newly built or renovated vacation home – like Laguna Gecko Villa – can limit these extra costs in the first few years of ownership.
Reason #3: Fractional Ownership Is Worry-Free
A good property management team is a must-have for luxury vacation homeowners. When owners aren’t there to watch the house 24/7, they need to have a trusted, qualified team onsite to address the everyday issues and inform the owners of any larger problems. Property management is especially important when the vacation home is located in another country. A property management team is responsible for the following:
- Daily cleaning
- Addressing service needs for guests
- Handling emergencies
- Taking on repairs
- Alerting owners of property condition
- Managing bookings and communicating with guests
- Making payments for insurance, taxes, utilities
- Tracking finances
Of course, the duties of a property management company can vary, but having a strong team in place makes it easier to own a vacation home.
Reason #4: Fractional Ownership Is Real Ownership
When a timeshare is purchased, the buyer usually acquires the right to use a property, but they don’t obtain any physical ownership of the property. With fractional ownership, the buyer acquires real assets – the land, the structure, the furniture, plus any other assets associated with the property. Owners also have the right to make decisions on matters regarding the property. If the owners all agree to sell the property, they can do it. Or, if one owner decides to sell their share(s), they can do that as well.
A quick word on the timeshare versus fractional ownership distinction: the priority of a timeshare property is time spent while the priority of fractional ownership is investment quality. Fractional owners are approved due to their higher income, ability to afford maintenance, and are sometimes able to afford the entire property, but prefer to spread assets.
Not only is an investor buying into the property, but the surroundings. Desirable homes are located in places where people can relax, find adventure of all degrees, explore with safety and convenience, communicate easily and work in a short travel time.
Reason #5: Fractional Ownership Offers A Real Exit Strategy
Fractional ownership shares can be bought and sold like any piece of real estate, at any time. The property value of a vacation home in Placencia, Belize should appreciate with time, so owners will likely make money if they decide to sell. An owner who wants to sell their share(s) can work with the existing owners, a local real estate agent or broker, or in our case, the Developers, to place the share(s) up for sale.
Reason #6: Fractional Ownership Has Its Perks
Our company has developed partnerships with groups like THIRDHOME to give our fractional owners access to other vacation properties around the world. The partnership works like other known home sharing models, allowing owners to trade time at their own vacation home for the right to stay at other extraordinary vacation homes around the world. So even though the owner has a property in Belize, he or she can vacation in places like Cabo San Lucas, Vail, France, Amsterdam, Dubai, and many more.
Reason #7: Fractional Ownership Turns A Profit
Many fractional owners decide to use their share(s) as an investment, making up to a 10% return or more on their money each year. Consider someone who buys a 10% equity share of a 4,000-sq. ft. beach home for $150,000. With their share, the owner has access to the vacation home for five weeks every year. If this owner chooses to rent out all five weeks rather than use them personally, they could net $13,000 or more after their share of expenses are paid on the home. Not too shabby!
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Reason #8: Fractional Ownership Is All About Luxury
The term “luxury” can be misused when describing a vacation home, so be sure to tour it before you buy it. When walking through a property, pay attention to the little things – like the finishing touches on a bathroom countertop or the craftsmanship of a bedroom door – as much as the big things – like the cinderblock construction of the home and the private, luxury pool on the beach.
The property caretakers also play a pivotal role in making luxury come to life. Consider how a full-time chef, a 24/7 concierge, and a housekeeper can bring the idea of luxury to life. Access to private transportation, like a car, boat, or golf cart can set a luxury vacation home apart from the rest.
Reason #9: Fractional Ownership Includes Private Island Ownership
Owning a private island is the epitome of luxury real estate, and it’s within reach through fractional ownership. Private islands offer a unique type of vacation home ownership not found in any other situation. Owners have access to a piece of property that provides ultimate privacy – it’s surrounded by water on all sides. Also, accessing the island is typically restricted to boat or helicopter. Plus, the views are always spectacular.
Purchasing an entire island can sound a bit overwhelming, so that’s why fractional ownership is so attractive. With a good management team in place and co-owners to split the costs and mitigate the risk, it’s too perfect to pass up. Check out this amazing private island built for HGTV star, Chris Krolow — it’s called Gladden Caye.
Why Not Consider Fractional Ownership
Fractional ownership is a good option for vacation home buyers who want to own luxury real estate for a fraction of the cost. It’s an ideal investment for someone who wants a place to occasionally vacation without being tied down to only one home or one location forever. Fractional ownership is for the person who wants real ownership, not just the right to vacation somewhere on occasion. And finally, fractional ownership is perfect for the investor looking for a non-traditional asset. Vacation properties in Belize currently offer a great return on investment at an affordable price. Fractional ownership is a modern alternative to buying a dream vacation home.