How is Fractional Real Estate different from Timeshares?
Fractional Real Estate is found throughout the United States and the world. In Minnesota it is governed by the Subdivided Lands Act – even though Fractional Real Estate is real estate that is subdivided by Time.
Whenever the word “Time” and “Real Estate” appear in the same sentence, the natural inclination is to think of “Timeshare”. While timeshares work well for some people, there are important differences between Fractional Real Estate and a timeshare. The four key differences are as follows:
1. Fractional Share Size
With timeshares, you receive a very small deeded ownership or “points” that may be exchanged. Ownership typically equates to about one week of use. With Fractional Ownership, the amount of ownership is typically four weeks. This closely matches the amount of time a vacation home is typically used and is one of the reasons Fractional Real Estate makes sense for so many people.
2. Entry Price
Timeshares are well known as an impulse purchase. In order for real estate to be an impulse purchase, the entry price point must be very low – prices are typically under $20K and more commonly in the $5-$15K range. Fractional Real Estate makes a true vacation home more affordable by lowering the entry price and the ongoing maintenance costs. Entry prices range from $50K to well over $1M and typically between $100-$500K which puts ownership within reach of more families
3. Level of Accommodations
Timeshares are often one and two bedroom configurations that are aimed at small families, couples and individuals as a hotel room alternative. Fractional Real Estate is quite different – it is typically large three and four bedroom accommodations that create a more convenient arrangement for larger families and extended stays.
4. Deeded Ownership/Appreciation
It is no secret that timeshares have huge marketing costs that are built into the product because each unit needs to be sold 52 times. When a timeshare is resold, those marketing costs are “lost” by the consumer and therefore appreciation is very difficult if not impossible. With Fractional Real Estate, while the marketing costs are higher than single ownership, they are nowhere near that of timeshares and therefore more closely follow the appreciation of the land or lakeshore.
We realize that some people reading this will still decide Fractional Real Estate is a timeshare. Do these same people think that family members who buy a cabin together are buying “timeshares”? The truth is Fractional Real Estate most closely resembles this ownership model – except all the maintenance and usage have been defined ahead of time and family squabbles have been avoided. Another key advantage is that Fractional Real Estate allows individual family members to sell their part of the cabin without complicated “buy-out” or “first right of refusal” clauses.
We encourage you to learn more about the Basics of Fractional Real Estate and some of the Details of Ownership at Clamshell Beach. We’re convinced that once you spend some time learning the details, you will see why Fractional Real Estate is the sensible approach to lake cottage ownership.