Is Fractional Ownership Different from a Timeshare?
Vacation home co-ownership, or fractional ownership, is not a new concept. This is not to be confused with a timeshare when you purchase scheduled weeks of use. As a fractional owner in Ketchum, Idaho you have the option to sell or transfer your ownership as desired and enjoy use throughout the duration of your ownership.
Luxury Fractional Ownership is on the Rise
With rising real estate costs and a new wave of financially savvy byers, the co-ownership market has seen a surge of growth as an alternative ownership option. Co-ownership presents a solution for buyers who want to own a vacation home without the heavy up-front cost or ongoing burden of managing a vacant home. Is fractional ownership right for you in Ketchum or Sun Valley, Idaho? We have not seen an influx in fractional ownerships in our area yet.
Cons of Fractional Ownership
Traditional bank financing can be tricky for fractional ownership. Many lenders will require a 50% down payment. Owners should be aware of the owner-default risk created with the presence of loans. Specifically, to what extent can a loan default by one owner affect the other owners? This will depend on how the loan is secured and it would be wise to work with a real estate attorney to ensure you are protected if a fellow owner defaults on their loan.
Working with multiple owner(s) can be difficult to make decisions about renovations, use time and maintenance. Owners must develop a decision making hierarchy and system. Owners can hire a third party management company to make decisions on the owners behalf. Or on the other extreme, all property decisions could be directed to a primary owner. Decisions involving major changes or expenses to the property could be voted on by owners.
Is a Fixed or Variable Usage Right for You?
Fixed Rotations are set for each owner ensuring he/she gets every usable period of the year over a period of years.
Variable Rotations are drafted annually where owners select their usage each year with a rotating system of selection priority.
How Are Expenses Managed?
In shared ownership arrangements involving a single vacation home, operating expenses such as insurance, maintenance, repairs, improvements, utilities and management are usually divided in proportion to ownership shares. There are many home management companies in Ketchum that are qualified to manage a Luxury Fractional Vacation Home in Ketchum or Sun Valley, Idaho.
Many fractional ownership arrangements involve the creation of an LLC, trust or corporation. The entity owns the property. Owners should work with an attorney to draft agreements and documents regarding any and all specific situations that could arise during ownership.
Advantages of a LLC for your Fractional Ownership
Creating an LLC for fractional ownership offers many advantages such as expediting the sales process, protecting owners from liabilities, protecting shared property from creditors and making it easier to enforce the owner agreement.