The Part-Time Homeowner, Continued

Baby boomers are embracing fractional ownership of vacation properties; but this isn’t your mother’s timeshare (even if it is).

Instead of buying a place they’ll only use a few weeks a year, an increasing number of homeowners are opting to buy into a destination or resort club, vacation condo or other partial ownership property. And it’s created a unique second-home market.

According to the U.S. Federal Trade Commission, there are two basic kinds of vacation ownership: timeshares and vacation interval plans. Both require an initial purchase payment and ongoing maintenance fees.

In a timeshare–a unit which you own for the number of years stipulated in the purchase contract or until you sell it–your interest is considered real property. You can rent, sell, exchange or will your unit. Along with other timeshare owners, you own the resort it exists in.

However, in a vacation interval property, a developer owns the resort. You purchase the right to use its condos or units for a specific time period, such as a number of weeks a year, or for the equivalent of a number of points. Vacation interval plans also can include fractional ownership, in which
you purchase a large chunk of vacation ownership time, usually 26 weeks
or less, and biennial, which lets you use a resort every other year.

The contracts often don’t last forever; usually they’re good for between 10 and 50 years. But, perhaps most importantly, the interest you own is legally regarded as personal property.

To the low-maintenance vacationer, that may sound great. However, purchasing a portion of a vacation home has its risks–as well as its rewards.

How do you know if it’s right for you? A few questions to ask before you buy:

  • How much will you use the property–and when? Fractional ownership deals are great for people who only plan to use a property for a couple of weeks a year; but take note, the spontaneous vacation isn’t really an option. Hot locations often require booking way ahead of time; most companies won’t guarantee even less-popular spots will be open for last-minute trips.
  • What kind of long-term investment are you looking for? When a fractional ownership company sells an item you co-own, you’ll get a cut–if any applies–and can still retain ownership, according to Fox Business. But the Federal Trade Commission cautions homeowners to view the properties as vacation destinations,  and not just as investments, because, as in any real estate purchase, the principle of supply and demand applies–and the sheer number of available destination and fractional ownership options can reduce resale price.
  • Is the company you’re considering buying from legit? Aside from the obvious real estate scam concerns, you want to make sure your fractional or other ownership provider is a smooth operator. New companies don’t have proven maintenance records, and you run the risk of finding out scheduling and upkeep aren’t as stellar as you’d like.

If the company checks out and the program fits your vacation needs, fractional ownership may be a way to take on a second property without many of the typical homeowner headaches.

And, if not, don’t let the market scare you from buying a second home or vacation condo. Hot destinations and beachfront areas are always going to have a limited supply of land.

Thus, even though the market may be dipping now, vacation properties will always retain some value–for you, and for people who might want to buy and rent them. We may be in a slowing economy, but that doesn’t mean anyone wants to skip their annual time away.

Vacations may be within the U.S. and possibly more local this year, according to a recent Conference Board consumer survey, but we’re still goin’ on them. The survey found 45.8 percent of Americans plan to take a vacation within six months–that’s only down slightly from last year, which showed 46.4 percent were ready to hit the road.

Given that we’re rumored to be sliding into a recession and are facing higher food, gas and energy prices–oh, and a percentage of Americans are so in debt they’re losing their homes–that number is surprisingly high.

But it illustrates one key principle to keep in mind when considering buying a vacation home: They can decline economic growth, but they can’t take away our Disneyworld. So invest away.