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Making a Profit on Selling your Vacation Home the Fractional Way
By CottageGuru | December 3, 2007
Fractionalize to Maximize - E-Book Review
I am intrigued by the concept of fractional ownership. When I hear owners complain they never have time to spend at their cottage and it is left empty much of the year, it is clear the economics of cottage ownership may deter many potential buyers from getting into the market. So what about just buying the number of weeks you actually plan on using and only pay the costs of tax, insurance and upkeep for the weeks you use.
We have friends with a property on the Northstar development at Tahoe who own a seventh of their property. This gives 7 weeks of the year and since the weeks rotate, they get the opportunity of different high season weeks each year. If they don’t use one of their allocated weeks, they offer it to friends or relatives, or trade it with the other owners. The property is worth over $1.million which would put it out of the range of many potential second home owners, but their 1/7th ownership makes it manageable for all the owner/partners.
I’m familiar with lakefront cottage, town house and condo developments offering fractional sales, but the idea of individual property owners marketing their sale in this way is new to me. The more I think about it, the more creative an option it seems to be, particularly in a slow or dormant real estate market. So when I got the opportunity to review Sherman Potvin’s ebook, ‘Fractionalize to Maximize – Dividing your Vacation Home into Profit’, I was curious how this might work in an independent project.
This is not a lengthy read – the first fifty pages outline what fractional ownership is; offers suggestions on why owners might choose to go this route; how to prepare a property for sale, and generally provides an insightful ‘how to’ on the process. I was particularly interested in the section on setting the selling price, calculating fees on expense and maintenance, and establishing a Home Owners Association contract.
There is clear explanation on selecting the size of the fraction to offer, determining the number of weeks to divide the property into, and how to arrange the weeks – called the Fractional Use Plan.
Sherman makes a good point at the beginning of the book about checking local ordinances and bylaws and uncovering potential barriers to selling fractions in your property. It would not be worth embarking on any project without checking the legal aspects at the outset.
I was initially taken aback by the cost of the ebook which is $129 for the digital download, but that concern was dispelled by the second section which is devoted to resources, and includes a comprehensive selection of legal documents. The sample Fractional Plan alone is sufficient to cover the cost of the book, and the additional resources that include a schedule planning calendar, a management agreement and sales scripts also look very useful.
There are a couple of things I would have liked to see such as a more comprehensive section on Management and Concierge Services, and the option to download the documents in an editable format so I could adapt them to my own circumstances. This aside, for investors, realtors, and anyone seriously interested in selling their property creatively and maximizing the potential for profit, the book has a lot of value in its pages.
Purchasers of the book also benefit from a range of discounted services from Potvin’s website Luxury Fractional Guide
Topics: Marketing, Useful Resources |
December 3rd, 2007 at 7:03 pm
Heather,
Great blog. I talked to several people at the Cottage Life Fall show who own fractional cottages. They love it. No fuss, no muss. They just show up for their alloted week, enjoy it and go home without a care in the world, the rest is looked after. Hmmmm kinda makes you wonder doesn’t it?
I will likely blog about this topic in the near future and will be sure to reference your site. By the way, have you read, The Complete Guide to Buying and Owning Recreation Property in Canada by Douglas Gray - it is on my “to-do” list.
Cheers,
Julie
http://www.cottagedaily.com
December 4th, 2007 at 1:44 pm
Owning fractionally often enables people to justify buying a cottage, even if they could afford to buy outright. Holiday letting can be irritating if they want to feel that the cottage really is their own and often the most lettable periods are when they want to use it themselves.
Once you’ve decided to buy a fraction, people can then usually afford a better or larger cottage.
Having spoken to many people who share boats and properties, the ideal share is often quarter shares. If the owners have compatible requirements, ie they don’t all want school holidays (or don’t all not want school holidays!) and providing that the owners have relatively normal working lives and are to some extent limited in how often they can get to the cottage, then a quarter share allows owners to use the cottage pretty much whenever they wish. Most groups with 3-5 sharers get together once a year to agree roughly when they will use the cottage and any unallocated times are available on a first come basis thereafter.
There is some more guidance on creating fractional ownership arrangements here: http://www.yours2share.com/fractional-info/fractional-ownership-property-or-real-estate.shtml
December 4th, 2007 at 2:30 pm
Julie - yes, there seem to be more people looking for this more relaxed concept of ownership. With cottages becoming more pricey, it does make it more affordable.
Sophie - thanks for the link, you have an interesting site. There seem to be many different methods and models for making this work so it’s probably really important to find the one that works. It is a fascinating concept.
December 8th, 2007 at 3:32 pm
There is a new website that assists buyer’s looking to educate themselves about purchasing fractionals, The Fractional Concierge. You can find it at http://www.TheFractionalConcierge.com.
January 22nd, 2008 at 2:31 pm
[...] creatively and maximizing the potential for profit, the book has a lot of value in its pages. Read the full review here. 2nd Home Specialist Magazine November 2007 Written in a clear easy to understand style, the book [...]
January 22nd, 2008 at 2:50 pm
Heather, thanks for the review. I have posted a link to it on my website here:
http://luxuryfractionalguide.com/blog/2008/01/22/three-reviews-of-fractionalize-to-maximize/
Thanks!
Sherman
September 27th, 2008 at 8:59 am
That is an interesting idea. I have a friend who has recently started doing something similar with caravans.
Personally I don’t know whether fractional ownership is such a great idea unless there are very specific rules in place covering damage, maintenance and so forth
Guy McLaren’s last blog post..Get a free advert on South Africa’s hot new private house sale website.
March 25th, 2009 at 6:25 pm
Great article on fractional ownership!