Fractional v Alternatives

During the last five years, fractional ownership has evolved as a major contender in the holiday home market. We would not for one moment suggest that it is the perfect solution for every prospective overseas buyer, but we draw comparisons here with the two main alternatives, outright purchase and timeshare.
(The comments below are based on our own experience in the business over many years and, in our opinion, they represent a true reflection on the reality of the options being considered.)

Fractional v Timeshare

Let us look at the option of timeshare as this is really not a serious contender when you study the facts. Firstly, with timeshare the price is hugely inflated as there are usually more than 40 “owners” in each property. (In fact, these are not really owners, they simply have the right to use the property for one or two weeks each year for a predetermined number of years.) With so many buyers to find for each property, the marketing costs are extremely high and have to be reflected in the purchase price.

The annual running costs are also high, though not for the same reason. The management companies running the majority of these schemes, seem intent on charging excessive fees which, in our opinion, are often double the amount that they should be. The problem is that the timeshare owner has no say in how much is charged and the management team are not accountable for any of the expenditure. This is the single most common reason why many owners become dissatisfied with their timeshare purchase.

Finally, reselling your timeshare for anything approaching what you have paid for it is very uncommon, and many people are now selling their week/s for less than half of what they paid. The principle of timeshare is a very good one, but the high purchase price coupled with excessive running costs make it very poor value for money. This also applies to the “Points” format which some companies have introduced to try to camouflage just what poor value it offers.

We make no apology for the strong criticism of timeshare above, but it is based on many years experience in the industry. If you care to conduct your own extensive research, your conclusions will be very similar.

Fractional v Outright Purchase

Buying a second home at one of the popular holiday hotspots around the globe has long been the dream for many of us. Being able to spend quality time at our own “dream home in the sun” for a number of weeks each year, is a big temptation for those who can afford it. But is buying your own property for 52 weeks of the year always the right decision?

A recent survey conducted by one of the trade magazines revealed that owners only use their second home for an average of 40 nights each year. This means that the property is often left unoccupied for long periods of time or, in some cases, needs to be rented in order to bring in an income to cover a mortgage and/or other running costs.

Unfortunately, many unscrupulous selling agents will tell you how easy it is to rent out your property and, not only cover all of the annual running costs, but to provide you with an additional income as well. If you have a mortgage on the property, this is not usually the case, although there are some owners who have been able to achieve this. Some developers now offer rental guarantees for the first one or two years but, in most cases, they have just added this into their selling price as an inducement. Don’t be misled into thinking that you will be able to achieve these rental returns indefinitely.

A fractional purchase could be a more practical solution in acquiring your own property overseas, which makes excellent economic sense. You will be buying a share in a fully furnished, professionally managed property which is likely to increase significantly in value over a number of years. You share the annual costs so these are considerably less than having to pay it all yourself.

Furthermore, you still have a say in the running of the property yet the hassle of decorating, paying bills etc. has been removed. This leaves you to enjoy your vacation which is surely your main purpose for buying.

Finally, because your outlay is only a fraction of what it would be to purchase a property outright, you will now be able to buy a better quality property. Some people buy a studio or a one bedroom apartment outright as that is what their budget will allow. With fractional, you may be able to buy a luxury two bedroom apartment or perhaps a villa with your own private swimming pool … and spend a lot less money in doing so.

Fractional is not necessarily the ideal option for everyone but, hopefully, these comments will assist you in deciding if it may be right for you.

Is Fractional Ownership the best option for me?
It could be right for you if:
  1. You want to buy an overseas property outright but you can’t afford it.
  2. You would like to own a holiday home at a number of different locations.
  3. You are interested in buying overseas but would like to “test the water” prior to purchasing your own property.
  4. You can afford to buy outright but feel it difficult to justify the high cost of buying the style of property which meets your requirements.
  5. You only need it for a few weeks each year and do not want the hassle of maintaining it yourself or renting it out to cover the running costs.
  6. Your budget will only allow you to buy a cheap property when what you really want is something more luxurious.

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