3 Reasons Why the Boomers will change second home ownership in the US
There is also an environmental upside to fractional ownership, more people can ‘own’ the same parcel of rare-air real estate. These desirable locations are often in the most environmentally sensitive settings.
1.) Demographics - 78 million US Baby Boomers that will retire in the next 15 years (the largest population turned 50 in 2004-05, with 50th birthdays occurring every 7 seconds). The under told statistic is that there will be 103 million Empty Nesters in Europe by 2009 and Japan will have 32 million boomers by 2010, in a total population of only 127 million people. 213 million Boomers will compete for a uniquely similar lifestyle in retirement.
Fractional Ownership v Timeshare
How do fractionals compare with timeshares? They really don’t.
Fractionals are far more exclusive and include many more luxury amenities and services than timeshares. They tend to be larger homes, usually three to five bedrooms. Timeshares usually allow you use for just one to two weeks per year. Fractionals offer from two to 13 weeks, and those don’t necessarily have to be consecutive weeks. Pick the weeks you want.
With regard to financing, obtaining a bank or mortgage company loan on a timeshare is difficult. Rates are high, regardless of how good your credit. That’s because it’s a well-known fact that most timeshares depreciate over time. Conversely, banks and mortgage firms consider fractionals to be appreciating assets and will often treat them like any other second-home purchase.
Why do fractionals tend to appreciate while timeshares usually depreciate?
There are a couple of reasons. With fractionals, more of the buyer’s dollar goes to high quality finishes and “bricks and mortar” vs. sales commissions which can be as high as 40%-50% with timeshares.
Furthermore, timeshare values have historically been poor because of the large number of resales on the market, not to mention a continuous stream of new developments. The fact is the secondary market for timeshares has never really developed.
Conversely, there are a limited number of fractionals on the market. Most likely, that number will stay small because fractionals are built in only the very best, most highly desirable locations. Therefore, demand outpaces supply and results in property appreciation.
What is Fractional Ownership?
Fractional ownership is essentially partial ownership of a property. With fractional ownership, a property is owned and shared by at least two, and often several, individuals. This type of ownership is popular with vacation properties and resorts.
To understand fractional ownership, consider a large, and expensive, property that may be difficult to purchase and care for on your own. Instead of becoming the sole owner of the property, you purchase a share of it, as do 15 other people. Now, you own 1/15 of the property and have others to share in the burden of maintenance and taxes. Though this option is popular with larger properties, it may be used with smaller, lower cost properties as well.
Often, people confuse fractional ownership with timeshares. Both fractional ownership and timeshare situations are common with vacation and resort-type properties. With a timeshare, however, you would purchase a specific amount of time to spend at the property, such as 3 weeks out of every year. You would not actually own any portion of the property. With fractional ownership, you would actually own the portion of the property you purchase.
Fractional Ownership Overview - Real Estate
The practice of joining together with family and friends to share ownership of vacation property has been around for many years. But the fractional property industry started in the US in the Rocky Mountain ski resorts in the early 1990s. These first fractional developments recognized that people did not want to buy whole homes, which they would only use for a few weeks a year in the mountains. According to research firm Ragatz Associates there were over 250 fractional developments in North America in 2006 and fractional properties can now be found throughout the world.
Destination Clubs - An Overview
What are Destination Clubs?
Being part of a club entitles a member to the use of the clubs properties, and this applies whether it’s a health club, a country club or a golf club. A destination club is no different. The properties offered by this sort of exclusive organization are high-quality, fully serviced, luxury vacation homes. Destination clubs offer their members a flexible alternative to luxury hotels, second homes and vacation home rentals. The clubs have properties located in a variety of destinations, sometimes on a global scale. They also provide the peace of mind that comes from knowing each home will be maintained to a consistent, very high standard.
The Future is Bright for the Shared Ownership Industry
Ragatz Associates recently released their latest annual survey of fractional homes, private residence clubs and destination clubs in North America. The overall combined sales were $2.3 billion in 2007, up 8.3 per cent from 2006.
The shared-ownership industry has grown by 50% in the last four years, and as the industry matures and becomes more widely understood by income-eligible households, it is fully expected that all preceding sales performance indicators will improve dramatically.
The future is bright for the shared-ownership industry!
Club Spotlight: Lookout Mountain Private Residence Club, Lookout Mountain, GA
The Lookout Mountain Private Residence Club is an exciting addition to the prestigious Canyon Ridge community. Their exclusive offering includes 24 luxurious and finely appointed custom designed homes located along the spectacular 18th hole on the Canyon Ridge Club golf course. Each home is professionally decorated, fully furnished and features luxurious finishes. The 18th hole features breathtaking views from the eastern bluff of the property. The Residence Club members enjoy the ultimate convenience of being within walking distance of the clubhouse, golf shop and the renowned bluffside Pavilion. Residents can enjoy a morning stroll on the extensive hiking trails, a cup of coffee or an early evening glass of wine. There is always activity at the Pavilion where friends and family gather to relax and enjoy the unencumbered beauty of the Chattanooga Valley and Pigeon Mountain National Forest.
Click here to learn more about the Lookout Mountain Private Residence Club…
Private Residence Clubs – “A Fantastic Vacation Home Alternative”
Vacation homebuyers have for decades shared the ownership and use of second homes to defray costs. It is only somewhat recently that this arrangement has been advanced through the formation of Private Residence Clubs.
These opulent properties, generally located in elite enclaves, have taken the hassle out of vacation home ownership and provided an eye-catching alternative to wholly-owned second homes at a fraction of the cost.
Private Residence Clubs are not to be confused with a timeshare or a typical vacation ownership plan. A timeshare is basically a renewable vacation; a Private Residence Club is a real estate investment with flexibility of use that models single-home ownership. With Private Residence Clubs, the buyer has an expectation of value and price appreciation.
