NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.
What is Fractional Interest Ownership?
Fractional Ownership Is the Key to Buying a Home You Otherwise Couldn’t Afford—Here’s How You Can Have Your Own Slice of Paradise for Cheap (realtor.com®, Aug. 15, 2024)
“Co-ownership or fractional ownership has become an increasingly popular way for people to own a portion of an investment property or vacation home. Depending on the property, it might involve splitting a home cost in half, or splitting it with more than a dozen people.”
What Is Fractional Ownership in Real Estate (+ Investor Tips) (The Close, Aug. 8, 2024)
Here are some key elements of fractional ownership homes:
- Ownership share: An investor gets a certain specified percentage of the property on top of a share of equity, usage rights, and income.
Usage rights: Generally, owners have the right to use the property for a certain number of days or weeks per year. Again, this would depend upon the fraction of ownership interest and terms specified in the contract. - Income and expenses: The owners share any income from the property, including any rental income, based on their proportional interest in the property. Likewise, expenses such as maintenance, property tax, or management fees are shared proportionately.
- Management and maintenance: The property is usually managed by a professional management company, which takes care of everyday operations, maintenance, and other administrative tasks, relieving owners of those responsibilities.
- Exit strategy: An owner may sell their share in the property after an agreed-upon holding period. In some fractional home ownership schemes, there is a secondary market through which shares can be traded, and the investors achieve liquidity.
Fractional Ownership: Definition, Purpose, Examples (Investopedia, Jan. 18, 2024)
- Fractional ownership is when the cost of an asset or property is split among individuals, each getting a share.
- All the shareholders may split the benefits of the asset pro rata, such as income sharing, reduced rates, and usage rights.
- This type of split is common in the purchase of expensive assets, such as vacation homes, luxury cars, and aircraft.
- Important factors to consider when buying fractional ownership include the management company's reputation, asset specifications, and potential appreciation.
Pros & Cons of Fractional Interest Ownership
You can now buy a fraction of a house. Should you? (Vox, Mar. 3, 2023)
“The basic pitch of fractional real estate platforms is that in just a few clicks, you can buy a share of a home (or shares of many, many homes) and then kick back and relax as rental profits roll in. So much of what’s billed as passive income isn’t actually passive, but fractional real estate companies contend that property ownership can genuinely require no hustle.”
Fractional Ownership in Real Estate (millionacres, Feb. 4, 2021)
As a way of investing in real estate without borrowing money to buy an entire piece of property, fractional ownership has its upsides and is comparable to investing in REITs in terms of requiring a smaller up-front investment and less labor than purchasing an entire property.
The Drawbacks of Fractional Real Estate: This Investment Offers Multiple Options, but Clients May Pay a Premium for the Access and Convenience (Financial Planning, May 2020) E
Nashville planner Shaun Melby adds that investors who want passive real estate exposure might be better off with a traditional, exchange-traded REIT, which diversifies by investing in hundreds or thousands of properties, rather than in one specific property. 1031 exchange advantages Depending on the legal structure, however, a fractional ownership investment can do something a REIT cannot: fit the needs of investors who want a 1031 exchange
The Pros and Cons of Fractional Ownership (Equity Estates, Feb. 13, 2020)
Pros: affordability, limited vacancy, divided responsibility among owners; Cons: selling isn’t straightforward, consensus can be tough, tied to one property, subject to restrictions.
Websites
Canadian Vacation Ownership Association (CVOA)
Industry-based association dedicated to furthering the vacation ownership industry in Canada and throughout the world.
Cooperative Association of Resort Exchangers, Inc. (c.a.r.e.)
Trade association established by representatives of timeshare resorts.
Fractional Ownership Resources and Articles (SirkinLaw)
As a law firm specializing in Fractional Interest Ownership, SirkinLaw provides detailed reference pages on a range of topics including Marketing and Selling Fractional Ownership, Operating and Managing Fractional Ownership Groups, and Fractional Ownership and Timeshare Law.
Resort and Second Home
Keep up on the latest developments in the resort and second home market, earn the Resort and Second-Home Property Specialist (RSPS) certification, and network with other members who specialize in the buying, selling, or management of investment, development, retirement, or second homes.
Resort and Second-Home Property Specialist
NAR’s RSPS certification is for REALTORS® who specialize in buying, selling, or management of properties for investment, development, retirement, or second homes in resort, recreational, and/or vacation destinations.
Resort Development Organisation (RDO)
European professional organization with members from all sectors of the industry across Europe, including resort developers, exchange companies, management and marketing companies, trustees, finance houses and resale companies.
Vacation Ownership Association of Southern Africa (VOASA)
Establishment to improve representation for reputable companies within the shared vacation ownership industry.
eBooks & Other Resources
eBooks.realtor.org
The following eBooks and digital audiobooks are available to NAR members:
Buying a Second Home (eBook)
How a Second Home Can Be Your Best Investment (eBook)
The Complete Guide to Buying a Second Home or Real Estate in Mexico (Audiobook, eBook)
Second Homes for Dummies (Audiobook, eBook)
The Everything Family Guide to Timeshares (eBook)
How to Invest in Real Estate & Pay Little or No Taxes: Use Tax Smart Loopholes to Boost Your Profits by 40% (eBook)
The Tax-Free Exchange Loophole: How Real Estate Investors Can Profit from the 1031 Exchange (eBook)
Timeshare Vacation for Dummies (eBook)
Books, Videos, Research Reports & More
As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.
Vacation Nation: The Complete Guide to Timeshare Private Residence Clubs, Fractionals & Destination Clubs, (Elaine Joli, 2009)
Vacation Home Fractional Conversion (Fractional Retreats LLC, 2008)
Have an idea for a real estate topic? Send us your suggestions.
The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.
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