If you’ve been looking for a second home, vacation home, or pied a terre–you might have encountered an emerging trend called “fractional home ownership.” At an initial glance, it feels a bit like Timeshares 2.0–but it’s a different concept entirely.
“Fractional home ownership is a real estate model where multiple individuals or entities collectively own and share ownership rights to a single property,” says Whitney Curry, Chief Marketing Officer of Pacaso, which is a marketplace offering co-ownerships in forty locations with everything from beach front property in Malibu to ski houses in Vail. Co-ownership allows people to adjust their ownership in accordance with the time they spend at the property. Here’s what you need to know about this real estate trend.
Not A Timeshare
While fractional home ownership or co-ownership sounds similar to a timeshare because both models provide access to real estate for a specified amount of time annually–that’s essentially where the similarities stop. Timeshares do not count as an asset. “
is a liability which gives the buyer a right to use the time of a grouping of properties. Timeshares are notoriously difficult to sell, and often at a loss. They are also easier to sell than timeshares because they can be listed for resale on the MLS or Zillow at a price chosen by the seller. The fractional home ownership properties are also easier to sell (but not always easy) than timeshares, because they can be listed on the MLS and Zillow for resale at a set price. So, if the fractional property you own increases in value during your ownership, you can sell for profit.”[A timeshare is]The Benefits Of Fractional Home Ownership
While it’s not without risk, John Walkup, co-founder of real estate data analytics company UrbanDigs tells me there are numerous benefits of this ownership model. “Fractional real estate ownership offers a combination of affordability and flexibility to individuals seeking a pied-a-terre or vacation home.” It is cheaper to own and maintain a property than to buy it outright. This makes it an attractive option for people who do not want to take on the financial burden of home ownership for a house they won’t use for long periods. These properties can generate income. It’s worth noting that Pacaso does not allow this.
Tulum Oasis Scottsdale
Another benefit is that the costs of renovation, furniture, and other essentials are split among the owners. Pacaso has made this a key part of its business model. All Pacaso houses are renovated and include premium furniture, as well as bespoke artwork by renowned artists such Elizabeth Sutton. All Pacaso houses are fully furnished and feature professional interior design. Curry says that no detail has been overlooked. From the luxury linens in the pool to the abundant appliances and silverware in kitchen, there is nothing left out. The homes are ready for the first owner to stay, so they can enjoy the time with their family and friends. This includes everything from cleaning to additional maintenance such as having the driveway plowed. This can be very attractive to those who want a second home but want to be entirely hands-off when it comes to maintenance.
Still, there are more risks involved with this investment model than sole ownership of a vacation home.
While this particular arrangement works most of the time, conflict has arisen over visiting dates as well as whether or not to renovate the bathrooms.
Another issue with fractional home ownership is that selling can be a challenge. Selling a fractional ownership can be more difficult than selling an entire property. This is due to the smaller group of buyers. He also says that financing can be difficult. The company also allows qualified buyers to purchase shares with crypto. Shares can also be purchased with crypto.
Another problem is that much like short-term rentals, some cities are considering banning these arrangements, including Newport Beach, California.
However, for someone looking for a vacation home that might be out of their reach otherwise and they’re willing to take a risk–fractional home ownership might be worth looking into.