If you’ve been researching timeshares, you’ve probably come across the term “fractional ownership”. What are the pros and cons of fractional ownership timeshares? What does it mean? And how does it differ from a regular timeshare?
Let’s address the elephant in the room.
A “fractional timeshare” is a timeshare where you own a portion of the property. In most instances, you will own a unit in the timeshare. However, you cannot visit anytime you want. You will be allowed a certain number of weeks where you can visit the property and stay in that unit. Fractional timeshares are deeded. Which means you pay taxes for the property. You will still pay maintenance fees with a fractional timeshare just like a traditional timeshare.
Fractional ownership timeshares tend to be offered in more upscale, luxury timeshare properties. You’ll find them in desired destination locations including Las Vegas, Mexico, and Colorado.
That’s because these are places where people will spend a lot of money just to be where the action is (Vegas), see the beauty of Planet Earth and the wonders of the sea (Mexico), and enjoy activities that are only found in a few places (think skiing in Aspen, Colorado).
So when a pitch is made that you could actually “own” real estate in one of these desirable locations, that’s a powerful bait that is too tempting to resist.
But there are details you need to be aware of if you’re considering a fractional ownership timeshare.
You Don’t Own the Entire Property
When you go to a timeshare presentation that is offering a fractional ownership, one of the first things that will be brought to your attention is that it is a “deeded timeshare”.
What that means is that you will be provided documentation to prove ownership. Just like the deed to a house or the title to a vehicle after it’s been paid off.
That may or may not be a good idea (we’ll talk about why later). But you will own a portion of the real estate that is your timeshare.
“What” you actually own is a little more detailed.
In most fractional ownership timeshare (also known as “deeded timeshare”) presentations, you’ll be shown “model” units.
These model units represent what a unit you might purchase will look like.
To give you more insight into this, I’ll explain my experience of going through these model units for the fractional ownership timeshare we almost bought in Las Vegas.
On this property, there were studio units, 1-bedroom, 2-bedroom, and 3-bedroom units. The studio and one-bedroom units are pretty easy to understand.
The 2 and 3-bedroom units were interesting.
The 2-bedroom unit was setup so that part of the unit could be locked out. This way privacy could be maintained if that’s what you want. Or you can rent the smaller unit out while you stay in the larger unit.
Remember, you “own” the unit.
The 3-bedroom unit was set up similarly just with an extra room.
You Can’t Visit Whenever You Want
This is the second thing to be aware of when considering fractional ownership timeshares. You can’t just visit when you want.
In order to make buying one of these units “affordable”, you will only be able to stay in that unit for a limited number of weeks.
The average length of time sold for these types of timeshares is about 5 weeks per year.
That might not sound like a lot of time for the amount of money you spend. But compared to a traditional points-based timeshare, it’s actually pretty generous.
With points-based timeshares, you don’t “own” any property. You don’t own any units in the timeshare. It will, however, be your “home” timeshare.
I’ll get into more detail about exchanging timeshare points in another post. But for this discussion, think of it like exchange rates for money.
The average points-based timeshare will allow you to stay for one or two weeks at an average timeshare. A more luxurious timeshare may use up those points.
So two weeks of points at an average timeshare might only give you one week at a luxury timeshare.
Therefore, having 5 weeks per year to schedule your vacations at a property you own can sound like a better option.
Which of those 5 weeks you can stay is another story altogether.
Although you “technically” own the unit, what you really own is the right to stay there 5 weeks out of the year. That means you’ll need to schedule which weeks you want to stay at the property.
And the dates available to you may not necessarily line up with what you have planned. So it’s something to keep in mind when considering making the purchase of a deeded or fractional ownership timeshare.
How Does Fractional Timeshare Ownership Differ from a Traditional Timeshare?
Here’s how fractional timeshares differ from traditional timeshares:
You Own It – You have a deed or title to a fractional timeshare. Traditional timeshares you do not.
Can Stay Longer – Fractional timeshares give an average of 5 weeks of use per year. Traditional timeshares limit you to 2 weeks on average with the option to buy more points to spend more time.
A Voice In How It’s Managed – Fractional timeshares tend to have homeowners associations which will give you a say in how the property is run. You have no input into how a traditional timeshare is managed.
Dedicated Vacation Spot – Fractional timeshares only allow you to stay at the one property you bought into. Traditional timeshares allow you to stay at various properties around the world or trade to take a cruise. The exception to this is if your fractional timeshare participates in a timeshare exchange program.
You Own It
We’ve discussed this at length earlier. But it bears repeating.
A fractional ownership timeshare means that you own a piece of the property just like you would any other real estate. The only catch is that you only own a “piece” of it. Not the entire property.
Can Stay Longer
With a typical timeshare that uses points, you’ll get what amounts to two weeks. I say “what amounts to two weeks” because it’s a points system. And just like your credit card “points”, their actual value is ambiguous.
We won’t go into points systems here. We’ll discuss that in another post. But suffice it to say that the points aren’t what’s important. It’s how your timeshare property is valued.
For purposes of this discussion, your points will usually equal one or two weeks, depending on what the salesperson was able to convince you to buy.
With a fractional timeshare ownership, you typically get 5 weeks to use the unit on the property. That’s one month and one week vs half a month.
That means buying a fractional ownership timeshare – assuming the cost is the same as a regular timeshare – has more value. Particularly if you vacation often.
A Voice in How It’s Managed
Because you’re an “owner”, it means you’ll have a homeowner’s association. Any repairs or improvements to the property will need the approval of the owners.
Unlike a regular timeshare, you have a say in what will or won’t be done on the property. With a traditional timeshare, the company that owns the property decides what will be done. Whether you like it or not.
Dedicated Vacation Spot
With a fractional ownership timeshare, you have a dedicated building and unit that you know you can vacation at every year.
This may or may not be a good thing depending on your circumstance. We’ll talk about this in more detail in the pros and cons section.
With a traditional timeshare, the salesperson will try to sell you on the virtues of that property. But they will also make sure you know that you don’t have to stay there.
Seeing images of amazing locations flash before your eyes in a video is a great way of getting this point across.
And your salesperson will be quick to tell you that you can use your points to stay at any one of these amazing locations in the exchange network. You can even trade them to take a cruise.
Now that you know the differences between a fractional timeshare and a traditional timeshare, it’s time to look at it more critically.
So our next section will discuss the pros and cons of fractional timeshare ownership.
Pros and Cons of Fractional Timeshare Ownership
Let’s look at the highlights….
More time to spend at the property than traditional timeshares
Properties are usually nicer and more luxurious than traditional timeshares
Can stay at an expensive property for a fraction of the costs
If the property goes up in value, you reap the benefits
Great for people who like to vacation many times during the year
Because it’s a deeded title, it can be tax deductible
Good for people that have to give their vacation schedule to their employer at the beginning of the year
Because you own the week in your unit, you can rent the weeks you aren’t using it
You don’t truly own the property. You own a unit in the property
Unless the property is part of an exchange program, you have to go to the same place all the time
Because it is part of a piece of real estate, maintenance fees can increase quickly (more on that later)
One of the virtues that will be held up is that you “own” your timeshare.
Does that really work the same as “owning” a property outright?
Why Owning a Deeded (Fractional) Timeshare Isn’t Like Owning a Condo Unit
The piece of property that you own is a unit – either a studio, 1-bedroom, 2-bedroom, or 3-bedroom. And in some instances, a 4-bedroom.
You might think that it’s like owning a condo. After all, you own a unit in a building. And no one that buys a condo is under the illusion that they own the building.
And in a way, that would be a good analogy. But there is a BIG difference.
Let’s say you purchased a condo in a popular vacation area known to have timeshares. We’ll go with Florida.
After you purchase your condo, it’s unlikely that you will live in it if you don’t live in the state of Florida. In that case, you would probably rent out the condo and come on the weeks you want to vacation in Florida.
It’s similar with a fractional ownership timeshare. Except for one thing.
You’re only allowed to stay in it for 5 weeks. The remainder of the time someone else has the “right” to be in the unit.
This means you don’t have flexibility. And you’re paying a lot of money to sacrifice the chance to stay at a place you own when you want to be there.
Remember, too, that with the condo you own, you can decide what week you want to stay there. With a fractional timeshare, you can only go on your designated weeks.
And think, too, of what it will be like having a unit that someone else claims an equal share of ownership. Except your standards of cleanliness and other things differ.
Some might argue that maintenance fees cover things like this. And it’s true that those fees are partially for just these things.
But if there are enough people who abuse the property when they stay, it will most certainly make your maintenance fee go up.
Another might respond to this saying that renting the unit out could invite people who will trash the unit.
There is truth to that position. However, there are other things to factor in if renting out a condo you own, including:
You can keep their deposit if the guest trashes your place
You can prevent them from ever staying at your property again
You may be able to file criminal charges against the people who destroyed the property
In a fractional (deeded) timeshare, you can’t do any of these things to the other owners no matter how bad they are.
So, as you can see, owning a deeded timeshare is not the same as owning a condo.
Fractional Ownership Timeshare Maintenance Fees – What Do They Cover?
In another post, I outline what is covered with traditional timeshare maintenance fees. But for fractional ownership timeshares, there is more to it.
But just as a brief refresher, traditional timeshare maintenance fees cover the upkeep of the property – repairs, staff salary, etc.
For fractional ownership, the timeshare maintenance fee covers:
And get this….
Those fees can increase as much as 4% every year.
That can make owning a fractional timeshare an expensive vacation option.
That means you’ll have to decide if the luxury of owning a unit that you can visit at the same time every year is worth it. Or is it just as easy and cheaper to book things through sites like HotelsToGo?
What Are Your Thoughts?
Have you considered getting a timeshare? Has this discussion of a deeded or fractional timeshare vs a traditional timeshare been beneficial in helping you make a decision?
If so, why not share this post on your favorite social media platform so you friends and family can benefit from this information.
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