Why Fractional Ownership Is Better Than A Timeshare

When I speak to someone who shows an interest in fractional ownership properties, I can understand when that person says “is this a timeshare?”

What I can tell you is that the two are quite different in a number of important ways.

Timeshares have been around since the 1960s and opened up the dream of owning a share of property abroad to those who perhaps didn’t have the funds to actually buy a property of their own.

What they did was by time instead of deeds hence the words ‘time’ and ‘share’ were put together to create ‘timeshare.’
It would be another 30 years before the idea of fractional ownership appeared.

Fractional ownership is a way for investors to actually own part of the asset itself, rather than just a share of time with several other timeshare owners in the same property.

Fractional ownership is still thought of as something new, yet it has been around since the 1990s.

The idea started out as a way to buy airplanes until one day someone in a Rocky Mountain ski resort decided, it would be a great way for investors to own vacation property too. Fractional ownership was born.

So when you buy a timeshare you are buying time in a property unlike a fractional ownership arrangement where you are buying a deeded share of the property.

The advantage fractional ownership has over timeshare is that you own a part of the property and you can sell your fraction for a profit in the future.

With a timeshare, you can sell the time you have in that property, however you will be competing with several others trying to do the same thing.

So trying to sell a timeshare is far more difficult and it will usually be worth less than the money paid for it.  

Is one better than the other? This really comes down to your goals and objectives. If you are an investor, fractional ownership makes far more sense. You own a share of the property and the time.

A friend of mine who is not an investor, bought a timeshare to save money on his holidays. He has no active interest in the property and he doesn’t intend to make any money from it. If he did he would be disappointed.

Let’s imagine for a moment that this same friend starts to think about retirement. He may be hoping to build a nest egg for himself and his family as well as provide them with a place to go on holiday.

The timeshare would not offer him any financial security. He pays the company he gets a small percentage of usage – that is it. Then what? He has no exit strategy.

If my friend decides to think like an investor, then he will be thinking about fractional ownership instead. With fractional ownership he not only gets access to a deed, he also gets a return on his investment.

So if my friend has fractional ownership of a hotel room, he receives a share of the profit from people staying in the room.
He may even have the option to sell the room back to the developer for a guaranteed amount the same or more than he initially invested and gets use of the room depending on the fractional arrangement.

So the main thing to remember is that timeshares are for leisure purchasers like my friend. Fractional ownership is deeded and for those who want more than just a share of time.

What are your thoughts on fractional ownership and timeshare? I would be interested to hear them.

Kind regards

Loxley McKenzie
Managing Director

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