I understand that Fractional Real Estate is real estate subdivided by time, how is it different from a timeshare?
Fractional Real Estate is found throughout the United States and the world. In Minnesota, Fractional Real Estate is governed by the Subdivided Lands Act – even though it is real estate subdivided by Time.
Whenever the word “Time” and “Real Estate” appear in the same sentence, the natural inclination is to think of “Timeshare”. There are many different types of timeshares and many circumstances, but the four key differences between timeshares and Fractional Real Estate 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 it is one of the reasons why 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 lowering 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’s typically large three and four bedroom accommodations that create a more convenient arrangement for large 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.
Summary
Both timeshares and Fractional Real Estate have a place in the vacation market. After reviewing the four key differences, you will see that timeshares are generally more about a “transient” experience where “trading is important. Fractional Real Estate on the other hand is just like the traditional lake cabin that families return to each year.
- What exactly is Fractional Real Estate?
- How is Fractional Real Estate like owning a cottage with my friends and family?
- What happens if one of the owners of a piece of Fractional Real Estate is foreclosed upon?
- Why would I want to sell my lake cabin as Fractional Real Estate?
For more information call the Fractional Real Estate Experts at Minnesota Lake Cottages, (866) 940-7069
