Pricing and Financing Questions

If 10% ownership costs $79,900, is this a $799,000 cottage if it is sold as whole ownership?

No, not based upon direct market comparables.  Fractional Real Estate pricing is similar to other items that you may buy only part of.  When you buy one slice of pizza, you pay a premium for buying just one slice.  But when you can’t eat a whole pizza, (ie – you don’t have that much vacation time) why would you buy the whole thing?  When you buy Fractional Real Estate (like buying a slice of pizza), you are buying what you will actually use.

Will you sell a cottage on a Contract for Deed?

Yes. Contract for Deed options are available for qualified buyers.

Can I get bank financing for these cottages?

Yes. Because you get a deed, obtaining a mortgage is straightforward and banks like the protection that a condominium association provides. Mortgages for Fractional Real Estate are typically handled by local banks because they are not “resold” on the secondary market to places like FANNIE MAE and FREDDIE MAC. Because they are not resold on the secondary market, rates are typically a point or so higher, but it really depends on your financial strength.

Can I finance this with a home equity loan on my primary residence?

Yes. Because Fractional Real Estate is reasonably priced, in many cases a simple home equity loan can be used to buy your new Cottage on Whitefish. This additional amount on your home loan will be provide the lowest financing interest rate. Be sure to consult your accountant for further advice.

Can I do a 1031 property exchange to buy a cottage here?

Yes, if you take advantage of the rental program. A 1031 property exchange allows you to sell one type of rental property and exchange it for another type of rental property to avoid capital gains taxes. For example, you could sell farm land that you rent and exchange it for a cottage here if you don’t use it more than 2 weeks a year and if you rent your cottage. You could also buy multiple fractions if you desire. Once again, consult your accountant for tax advice. If you need a 1031 Facilitator, we will be glad to provide you the name of a local Facilitator or your accountant can provide you information about one in your area.