Are Fractional Shares For You?
Timeshare
Fractional shares (fractionals) are sometimes confused with other vacation property options, such as time shares and condo hotels. While there are similarities, there are a number of things that make fractional shares unique, and thus suited for a certain type of vacation property buyer.
Fractional shares (fractionals) are sometimes confused with other vacation property options, such as time shares and condo hotels. While there are similarities, there are a number of things that make fractional shares unique, and thus suited for a certain type of vacation property buyer.
Fractionals, also referred to as private residence clubs, are similar to condo hotels in that they can be put into a rental pool when the owners are not using the property. Also, fractionals are considered a second home purchase with interest and equity benefits that go along with ownership. But unlike a condo hotel, fractionals are typically luxurious private homes located in the most exclusive areas.
Although they are available in studio and one-bedroom units, most are larger with several bedrooms, family rooms, pools, decks and outdoor recreation areas, and a host of other features that make them exclusive properties. A fractional property would be out of the price range of most individuals, but because ownership of the home is divided between a small group of people, this upscale lifestyle becomes affordable.
Typically fractionals are split in 4 to 8 shares, which means that arranging time at the property is less competitive than other types of shared ownership properties. There is no requirement that you have contact with the other owners, but many do develop friendships or at least get to know each other at annual ownership meetings. How involved you want to be with the other owners is up to you.
Even those that could afford to purchase a million dollar vacation home may only be able to use the property for a total of a month or two during the year and might feel that it is not a wise investment. Fractionals allow owners to decide how often they want to use the property, with packages ranging from two weeks to three months (not consecutively). Prices vary accordingly.
This is an ideal situation for those who enjoy staying at quality lodging when on vacation and prefer to put money toward their own investment, rather than putting that money into the pockets of a hotel chain or resort management firm. When you own a fractional, you can rent it out yourself or offer it to friends and other family members. And if you decide that you want to sell your share of ownership, you are free to do so at any time. Or you can will it to your children or other designee.
Fractionals first became popular in the posh ski resorts of Colorado and Utah and beach communities of California and the Caribbean but have spread to other areas of the country, including Florida. In fact, fractionals are the fastest growing sector of the timeshare industry, growing over three times faster than the industry as a whole
One of the reasons they are so popular is because since you purchase deeded ownership to your share of the property, banks offer more favorable financing for fractionals than for other shared ownership options, often treating them as second home purchases. Because there are far fewer fractionals available than timeshares, their value tends to increase, making them a better bet for banks to finance.
Another benefit of fractionals that makes them popular to buyers is that many of them come with an option to upgrade to a larger residence if one is available. And some fractional properties are owned by organizations with units in other parts of the country or world, and they will allow you to transfer your scheduled time to one of these other properties. So you may own an oceanside unit in Florida, but can spend a weekend skiing in Aspen, while staying in the same luxurious comfort, often for no additional cost.
And with a fractional, you dont have to worry about maintenance, repairs, or other ownership responsibilities that can get overwhelming with a second home. All of these services are included in your annual maintenance fee, which is similar to membership fees paid by those who belong to a homeowners association or gated community.
Many fractional properties are managed by lodging and hospitality experts like Ritz-Carlton and Four Seasons. This ensures that your property will be well maintained and offer the best in guest services and amenities. And if you have the option of placing your unit in a rental pool on a rotating basis, the reputation and sales clout of the management company increases the likelihood that the unit will be rented.
Perhaps the biggest appeal of fractionals is the personal service you receive from the staff. Prior to arriving, they will ready the residence for you, decorating the home with photos, artwork, books, DVDs, bedding and other personal items you keep in storage. They will purchase food according to your instructions and add a hide-a-bed or crib if needed. Everything is ready for you when you get there.
If your home is located in a resort community or luxury hotel property, you also receive the services and amenities that go along with the location. This often means access to golf courses, marinas, spas, and other desirable extras. All of this comes at an average price of $100,000 to $500,000 depending on the total sale price of the home, the number of weeks in your package and the number of other owners.
There are many benefits and perks that come with fractional shares, but they can come at a hefty price. Before you search for fractional shares, make sure it fits your budget. If not, there are other vacation property options that may suit your needs.
About the Author: Leon Altman is the founder of the InvestingIN Real Estate Letter - http://www.InvestingIN.com/realestate/LtrSignup3.htmFor more on finding and buying fractional shares, check out http://www.InvestingIN.com/realestate/resorts/fractionals.htm
Source: www.isnare.comApartment Loan 101Cameron Brown
So youre interested in going into business as a property manager? Have you given any thought yet to youll enter this potentially profitable market? Reality check-unless youve just inherited a large sum of money from a relative or are otherwise independently wealthy youre going to find someone to borrow from. This is where an apartment loan comes in.
Before you visit the local bank or other lending institution, it may be wise to ask yourself how long you plan to own the apartment building or complex. Are you investing for the long-term? Answering this question will significantly influence the type apartment loan you should get.
If you are planning to own the property for two years or less, most experts agree that an apartment loan with an adjustable rate mortgage (ARM) will be your best bet. Like the name suggests, an ARM is a loan will an interest rate that may change with time in accordance with various factors. ARM apartment loans usually offer a better initial interest rate than other loans to offset the risk of future interest rate changes. An interest rate ceiling that may be reset annually also protects the mortgage holder.
If you plan to stay in the property management business for the long-term, you may want to look at getting a fixed rate apartment loan. A fixed rate loan guarantees the same interest rate over the life of the mortgage.
Supposing interest rates are historically low at the time you secure the apartment loan, this type of loan will lock you in at the best rate possible. On the other hand however, if interest rates are historically high at the time of the loan, you might be stuck paying interest at a higher rate than you would have with another type of apartment loan.
Another important question to answer before seeking an apartment loan source is the approximate cost of the property. This may seem like a no-brainer when looking for an apartment loan, but too many first-time investors just take the interest rates theyre given without question. If the apartment building youre interested in is selling for over $500,000, a direct lending source or investment company can usually give you a better interest rate than most banks or credit unions. However, if youre looking at a smaller apartment building selling for less than $500,000, you may want to check interest rates at the local bank.
With banks and other lending institutions anxious to provide you with an apartment loan, new loan options have emerged in recent years. Generally speaking, smaller banks and other lending sources like direct lenders have a greater degree of flexibility in what they can offer borrowers. In order to attract larger numbers of borrowers, many lenders now offer non-recourse.
A traditional recourse loan means that the lender has claim on personal or corporate assets in the event of a default by the borrower. On the other hand, a non-recourse apartment loan means the lender cannot hold you personally liable if you fail to repay the debt as promised. The only recourse for compensation to the lender is to take the property youve pledged as security for your loan, but he cannot claim any other assets or money from you if you default.
Whichever apartment loan option you decide on, its important to be certain you understand the details. Its vitally important that you choose a lender that has both the experience and inclination to take the time to sit down with you and answer your questions clearly. Getting your apartment loan from a source you can trust will go a long way in helping you find success and enjoyment in the exciting world of property investing and management.
About the Author: Cameron Brown is an internet marketer specializing in investment property. For more information on securing an apartment loan, please visit SNC.