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Published Date: February 15, 2024
Fractional real estate vs. a timeshareFractional vacation home ownership grants you partial ownership of a property's title, while timeshare ownership only allows you to own blocks of time to use a property.
When it comes to owning a vacation property, you might be considering fractional ownership vs. timeshare options. Both vacation home ownership models grant you regular access to your dream destination throughout the year.However, fractional ownership means you co-own the home, while timeshares allow you to own a period of time to spend at the vacation property. We’ll discuss the pros and cons of fractional ownership vs. timeshares, and present factional vacation options — including owning your own second home with Pacaso.| Fractional ownership | Timeshare | |
| Number of owners | At least two owners | Up to 52 owners |
| Scheduling availability | Five weeks or more | One to two weeks |
| Equity benefits | Property may appreciate in value | Owners do not have equity |
| Management | Owners can regulate it | Owners have no role in management |
| Maintenance | Owners are responsible for maintenance and taxes | Owners pay maintenance fees and annual taxes |
| Building | Single-family and multifamily units | Typically multifamily units |
| Resale value | Real estate tends to appreciate | Timeshares tend to depreciate |
What is a timeshare?
Timeshares are a way to buy the right to use a vacation property for a specific amount of time. That means no true property ownership and no gained equity. In most cases, buying a timeshare means paying for one week-long access to a condo, apartment or resort room.The average upfront cost for a timeshare unit is around $22,000, plus yearly maintenance fees, which often increase over time. The value of timeshares has long been debated — while upfront costs are relatively low compared to owning a second home, depreciation is high and resale opportunities are uncertain.| Pros | Cons |
| Less expensive than a home purchase | Increasing annual maintenance fees |
| Condo-style accommodations | Value depreciates over time |
| Easy booking | Resale process is difficult |
What is fractional home ownership?
Fractional home ownership is a shared real estate purchase strategy where multiple parties collectively own a property, distributing the costs among them. Typically found in condo and resort settings, this approach differs from traditional timeshares.While timeshares might restrict property access to just a few weeks annually, fractional ownership often grants owners access for over multiple weeks a year, contingent on the number of joint owners.Because these units have fewer owners than timeshares, fractional owners often have more of a say in decisions regarding property maintenance and upkeep. Many fractional properties also offer on-site storage for owners.| Pros | Cons |
| Deeded ownership | More expensive than timeshares |
| Fewer owners | Higher annual fees |
| Value appreciation |
Timeshare vs. fractional ownership: 7 differences
Unlike short-term rentals, both timeshares and fractional ownership properties allow you to own part of your vacation experience. Although they share this similarity, these ownership models differ in seven key ways.Number of owners
The number of owners is an important factor to consider, since fractional owners may have to communicate and share decision-making responsibilities. Here is what to expect with both vacation ownership models:- Fractional ownership: Most fractional ownership properties limit ownership to 6-14 parties per unit.
- Timeshare: A single unit could have up to 52 owners.
Scheduling availability
As a co-owner, you’ll need to be cognizant of when the shared home is available to book. The number of days or weeks the home will be available largely depends on how many owners there are. Here is what potential scheduling availability could look like for both options:- Fractional ownership: Fractional ownership can allow access to the home for five weeks or more per year. Scheduling availability ultimately depends on the number of owners per unit.
- Timeshare: A traditional timeshare limits access to the property to one to two weeks per year.
Equity benefits
A vacation home can potentially serve as an investment that benefits owners with equity and value appreciation. Here are the equity opportunities for fractional ownership and timeshares:- Fractional ownership: As a co-owner of real estate, you can benefit from equity and value appreciation over time.
- Timeshare: Since you only own a block of time at the vacation property, you cannot reap the benefits of equity.
Management
Vacation home owners can choose to share property management, hire a property management company, or have no say at all. Here is how property management opportunities break down for both:- Fractional ownership: Co-owners can make joint decisions about how their shared vacation property is managed, like hiring a property manager.
- Timeshare: The timeshare developer, hotel or resort makes all property management decisions.
Maintenance
Similar to management, vacation home maintenance is a crucial part of owning a vacation property. This is how maintenance works for both options:- Fractional ownership: All owners must share the cost of maintaining their vacation property. Some co-owners decide to outsource this responsibility.
- Timeshare: Timeshare owners must pay annual maintenance fees that are subject to increase every year. The fee covers all maintenance costs.
Building
One of the biggest differences between fractional ownership of a vacation home and timeshares is the type of structure you’ll be staying in. Here is what to expect:- Fractional ownership: Both single-family and multifamily homes are available for co-owners to choose from in urban, suburban and rural areas.
- Timeshare: Timeshares are generally multifamily units within a hotel or resort complex.
Resale value
The resale process can look different for both ownership models. Here is what to expect when you’re ready to sell your vacation property:- Fractional ownership: Co-owners can sell their vacation home like a regular piece of real estate and generally expect to benefit from value appreciation.
- Timeshare: Timeshares typically depreciate over time and will likely be sold at a reduced cost.
Other popular vacation options
Timeshares and fractional ownership models aren’t the only ways to enjoy a vacation property. Let’s take a look at other popular vacation options like private residence clubs and destination clubs.Private residence club
Private residence clubs are similar to fractional properties in that both offer ownership interest in shares of a vacation property.Private residence clubs typically:- Are operated by luxury hospitality chains
- Have amenities usually found in high-end hotels
- Sell condominiums or villas
- Share access to the club’s golf courses or ski resorts
- Provide professional room cleaning and turndown service
- Provide access to other properties in the chain’s portfolio
| Pros | Cons |
| Access to luxury amenities | Very expensive |
| Deeded ownership | Resale challenges |
| Gained equity | High annual fees |
Destination club
A destination club grants members proprietary access to its services, which means high-end vacation homes on a non-equity basis in various locations around the world. With destination clubs:- Paying membership fees give a wide variety of luxury homes to rent
- Membership tiers offer varying levels of reservation priority
- You can stay in luxury single-family homes
- You can access amenities like beach clubs, private chefs and high-end spas
| Pros | Cons |
| Single-family homes in varied locales | Pricey membership fees |
| Pay-as-you-go model | Limited inventory |
| Luxury amenities | No gained equity |
The Pacaso difference
Pacaso’s professionally managed LLC co-ownership model offers a better, smarter, more modern way to own a second home. It's like having a few families come together to purchase a home and share the costs, but Pacaso takes care of all the details so that you can enjoy your home without the risk and hassle associated with a DIY co-ownership process.Pacaso offers:- True real estate property ownership that moves in value with the whole-home market — as a true owner, any equity realized is yours
- Ownership of a residential home, not just the right to use a condo or hotel room
- A fully furnished, professionally managed home where you don't have to deal with the typical hassles of second home ownership
- A smaller owner group; instead of up to 52 owners with timeshares, a Pacaso has a maximum of eight
- Exclusive use of the home by vetted owners and their guests through an equitable scheduling system, with no third-party rentals allowed
- Lower operating costs on items such as property management and repairs
- A streamlined and standardized resale approach — just like a whole home
FAQ about fractional ownership vs. timeshare
How does fractional ownership work?
Multiple buyers can form an LLC to jointly purchase a property. All co-owners will be responsible for the property’s expenses, like maintenance and utilities, and must agree on scheduling and property management.
How is timeshare ownership typically split?
Timeshare ownership is generally split into one to two weeks per family or individual every year.
Is fractional ownership a good investment?
Fractional ownership may be a good investment for vacationers who frequent the same destination and may want to co-own a second home.
Is fractional ownership better than a timeshare?
Fractional ownership may be better than a timeshare for people who can afford a higher initial purchase price and want to spend more than a week or two at their destination. Fractional co-owners can also potentially benefit from equity.
Ashley Rappa
Author
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