A next big thing to sell expensive properties: "fractional ownership"

There's a buzz on Clearwater Beach about a new way to revive homes sales in this comatose market. Two words: Fractional ownership.

It's sort of a modified time share concept in which you actually own a deeded portion of the property. They're doing it now on a project called Island Town Homes on the Intracoastal Waterway of Clearwater Beach.

The developers are offering up 7 units for about $1-million apiece. They hope to split ownership in each unit about 8 ways, so that people could buy a luxury unit on the water for about $200,000.

You don't even have to know the co-owners. A "use agreement" would hash out who occupies the unit at what time.

Is this the salvation for Clearwater Beach, which is suffering from a glut of million-dollar condos? Who knows. But the concept has tested successfully in Colorado ski resorts. So maybe there's a chance.

Interestingly, Realtors can sell each fraction individually. So you could have 8 Realtors splitting a commission on one unit. How's that for spreading the wealth?

Comments

[James]

Fractional ownership works well in Colorado ski resorts because the amount of real estate and other options (hotel choices) are limited.

Fractional ownership has several huge stumbling blocks. 1) difficult to sell, 2) lack of voting rights, 3) massive annual fees, 4) difficult to finance at a decent rate.

If you cannot find a nice place to stay for a month every year for $200k plus annual fees, then you deserve to be separated from your money. For example, many owners are renting out units at the Mandalay Beach Club for $3,000/month. Waterfront homes can be had for $2,000-$4,000 a month.

[Ed Smeltz]

I have to assume that the person who posted the first comment on Fractional ownership has absolutely no knowledge of what is being offered. Your stumbling blocks are way off. You can sell your deeded interest just as you can in whole ownership. Second, you have all the voting rights as any member of a Home Owners Association. Third the massive annual fees are no more than the HOA fees of an up-scale condo project. And finally the banks look at million dollar fractional projects as an appreciating asset and are readily financed at very competitive rates. Allow me to invite you to our project to get all the facts on the use plan before assuming that you only receive 4 weeks of vacation time per year.

[John]

If it looks like a time share, sounds like a time share, smells like a time share, it must be a time share. When you go hear the speil at the "project", make sure you get your coupon for a free night's stay... Clearwater made it's bed with developers that overdeveloped, now they must sleep with them.

[James]

1. I didn't say you can't sell your deed. It's just that no one wants to buy it. That's why resort timeshares can be bought/sold for pennies on the dollar, as long as the buyer is willing to pick up the massive fees.

2. When residents are only there a month every year, they demand many more amenities than a year-round lifestyle. Those amenities drive the fees to outrageous amounts. The last one I looked at, the Hyatt Coconut Point, was priced at about $600k per unit. However, the fees were over $50,000 per year annually per unit.

3. If each unit is sold multiple times, your vote is diluted that many times. Let's say that 100% of the people that live there in December want to put up xmas lights. Sorry! The December residents only have 1/12 of the vote. You also lose the right to customize your unit.

4. Fractional projects are an appreciating asset? Maybe in Colorado and Manhattan. There is a reason why a parallel industry exists to buy your "asset" back at 10 cents on the dollar.

[James]

Don't get me wrong, I think it is great that developers are coming up with these types of projects. I have had many great vacations at resorts that were rented from VRBO at far less than the price of a hotel room.

You'll never see me buying one, but I wish you the best of luck.

[Dave]

How do you divide it up? Who gets the good time of the year to be here. Nobody wants to be stuck here with May through October months.

[Sherman Potvin]

Ed is very much hitting the nail on the head! Those of you that are commenting with little or no knowledge may wnat to visit our website at www.lfguide.com to be enlightened.Fractional ownership is the wave of the future because it simply make sense,BTY, I live in Clearwater and they have just passed a new ordinance against fractionals and t/s, cheers, Sherman

[Dave]

So if you sell an 1/8 that 6.5 weeks for each share holder. That hardly sounds like a good deal for $200K. Why not lower the prices to sell more, what a concept!

[Toby]

There is some interesting stuff here on fractional written by some good independent press too. You may find it interesting if considering a fractional purchase.

[Ed Smeltz]

James your still missing the mark. It amazes me that you have so much to comment on with little to back it up. I invite you and the others to visit us, hear what the real story is then write an informative response. 161 Brightwater Dr., Clearwater Beach, Fl. 33767

[Dave]

Am I missing something. If these million dollar condos are going 8 ways for 200,000 apiece that's 1.6 million. Where is the extra $600,000 going? How much are association and other monthly fees?

[Ed Smeltz]

Dave allow me to answer your two questions. First the Use Plan is up to you. We have 3 ways for you to vacation. 1) Reserved Time: You will choose 3 weeks for the following year when you purchase. Then after all 8 in your unit has chosen their 3 weeks, which must be done by Sept 30 then we move into 2)Flex Time: here you can choose a vacation every 30 days. If your unit is not available I will put in one that is (equal accomadations). If you work the calander right you could get an additional 9 weeks. Both Reserved and Flex times may be used by you, friends, family. Then for Owners only we have 3) Get-A-Way time: Inside 15 days if any of my units are not reserved then you can book it for yourself for a quick weekend. For your second question of the numbers not adding up: Go to my web site at www.gulfcoastbeachclub.com to see all the amenities that go along with your new home. Anywhere from a Beach Car to your own new 20 sport boat. You even are a member of the local Belleview Biltmore Hotel and Golf resort. Please check it out.

[Dave]

Thanks for answering.

[Daniel Giannini]

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