If you want to purchase a ski home, but can't afford what you want...Fractional Ownership may be the answer. I have been working for 2 years with an experienced fractional company in Colorado to consider WV. They visited Timberline twice and believe they can introduce this into the market. They will be hosting a webinar with the Mortgage Company, Realtor, Legal Reps and Management soon. This is where you can find out how this works to decide if you want more information. If interested email me your contact info and I will let you know when the webinar takes place.
There are normally 4-6 parties purchasing a large home. It basically allows you to own a luxury home, but not pay the huge $$$. This works well in Colorado, Utah etc and I really want to purchase a large home at Timberline, but need other parties willing to explore this great opportunity. This would NOT commit you in anyway, but the webinar is a great educational opportunity to find out other ways to ski and not pay rent or huge mortgages. By the way...baby boomers are purchasing many fractional homes in many different locations. This way they can vacation at the beach, mountains, lake etc. Let me know if you are interested. Could be a great investment. You can sell your fraction at any time.
isn't this an alteration of the "timeshare" concept?
isn't this an alteration of the "timeshare" concept?
That's what I was thinking.
Can this be deleted? it seems like more of an advertisement then a classified... if they want to advertise something they can buy a banner and help support the site
One can vacation at the beach, mountains, lake, etc. anytime without buying a fractional property. It's just a new spin on timeshares. I've never understood why someone would go this route. The costs and annual fees of a timeshare/fractional property are huge, you're locked into one property, you get all the liability yourself, and they rarely make a good investment -- it can be very difficult to sell your fraction down the road (you certainly can't "sell at any time" unless you have a "buyer at any time." And the days of wild real estate appreciation are well behind us.) For far less money, you can *rent* a luxury vacation home anywhere in the world for a week or two, without any of the hassles of (part) owning a property. And you can rent a different place each trip. "But wait," the timeshare/fractional companies will say -- "you can trade your week with other properties!" That's like saying "why swim when you can swim with lead weights attached to your ankles?" What a headache. Anything that requires such a hard sell should be suspect.
I'm sure there are some people who have bought into these "opportunities" and claim they are wonderful. Sure, but I know many more people who have regretted it. As someone who has observed the ski industry for many years, my observation is that time shares and fractional properties are primarily intended to benefit the original builder/seller, as they can milk even more money out of the arrangement and sell to groups of people that otherwise couldn't afford the property. In the end the individual buyers get fleeced. I'm generalizing here, and not speaking to any specific fractional property. You're basically "renting" a property for a small number of weeks out of the year (and get to bicker with the other "owners" over what weeks you get), but paying much, much more than you would to rent a (usually nicer) property someone else owns for the same period of time. And with that "fake" ownership, you get all kinds of year-round hassles. But these companies try to go after the psychology of people wanting to "own" their home.
giantjr: your message does read like a late-night infomercial, and you indicate that you have a business relationship with fractional companies. The DCSki Classifieds forum is intended for private individuals to sell/trade/give items (such as the skis your kid has grown out of) to other readers, and not for commercial enterprises like what you are proposing. That kind of post isn't appropriate here.
First, let me clarify my so-called "business" relationship. I am a private citizen who loves to ski, but cannot afford a luxury home slopeside at a ski resort. Our ski friends started talking that we could pool our money together and purchase instead of paying rent to someone else's mortgage. Our friends ski about 8 weekends a year, plus the high priced holidays when kids are out of school. That's not just chunk change. Common sense. Parents do not have luxury of mid-week skiing.
We tried various ways to purchase a vacation home, but realized the risk involved with conventional loans. If one person wanted to sell, the entire group would have to refinance. Our group is active duty military and we move a lot meaning that the risk of someone wanting out was huge.
After months of research, we discovered fractional loans...each family would have their own mortgage relationship...not impacting others. If someone got orders to Europe, they could sell and not impact the rest of the group. Safer way to get a group together.
My "business" relationship...not! I simply asked a fractional mortgage company to work with a specific state requirement to file legal paperwork necessary for fractional mortgages. That's it! It took 2 years, but we did it! I am not a corporate person trying to take advantage of DC Ski. I am a stay at home mom who loves to ski and wants to own my own place where I can leave 6 peoples equipment, leave food, leave jackets etc and enjoy the winter ski slopes. That's it! If it is a crime in this forum for someone to ask if anyone is interested in learning more about these "opportunites" in the classified section...sad.
I cannot afford a house myself, but I can provide my children great memories with our friends via fractional ownership. I just wanted to know if anyone in the forum was interested. That's it!
Hence, the reason for education and knowledge. Obviously, there are some misnomers about fractional ownership. That is why I posed the question on the forum. It is not a timeshare. No swaping. To say that it would be stupid to "buy" into fractions is a tit for tat! I think it is stupid to throw away rent to someone else when I can own. As much as my family and friends ski, doesn't it make sense to own? What if we just like to be with our friends...is a condo a smart investment? Can we bring friends to a condo? No. But, if we can pool funds a own a larger house for the same price as a condo...why is that a crime? Rent vs Ownership.
"Opportunities" are part of a free society! I do not judge the person who desires to own a timeshare. I do not judge the person who just pays rent. I do not judge the millionare who purchases property for profit. I do not judge the person who just wants to own a home with friends. These are "opportunites"! The land of opportunites. There is something for everything based on priorities, expendible income and dreams.
Finally, if you thought I was just a business seller...why did you not pick up the phone and call. I left my phone number. You would have heard kids interrupting, dogs barking and a normal stay at home mother...just posing a question. Your opinion would have been very different. Why did you not just ask a question prior to implying I have alterior motives?
To DC Ski: If you feel this forum question violates rules, please feel free to remove it. I have no problem.
If what you describe is accurate, I would like to know what type of lending institutions would do what you described. Seems risky to me. One partner defaults, the remaining partners are at risk to lose their investment or they have to buy the defaulting partner's share. Just curious.
Each owner has own mortgage, qualifies on own credit, pays monthly mortgage. Only persons with 700+ credit scores qualify for fractional mortgages. Not for the financially struggling person. If they default, it impacts none of the other owners because each owner has seperate mortgage. In a default, the bank offers the sale of that fraction to other owners for purchase of the fraction. If noone is interested, the bank sells to someone via realtor. Herein lies the difference between conventional loan and fraction.
Due to high priced vacation property, fractional ownership is on the rise. It allows people with high credit to own homes without the burdon of an $800,000 mortgage. Less default on high priced loans because individual has a $200,000 loan. Mortgage companies are seeing the value of fractions that are not forclosing vs forclosures on homes owned by one person. As time goes on, the interest rate is decreasing on fractional mortgages because the default risk is lower for banks.
giantjr: I appreciate you clarifying your position and interest in this. I hope I didn't come on too strong. As a snowsports journalist, I have interacted with a lot of companies that profit from vacation properties and I know that many are looking at fractional ownership as the next way to make a lot of profit off of unsuspecting buyers. The big ski conglomerates (and lots of smaller players) make their money off of real estate -- not lift tickets. First, they sell the properties to buyers. Then, they encourage those buyers to enter the properties into a rental management program. Then, they keep profiting off of the rentals through management fees while the original buyer barely makes the mortgage payment. It's a great business model; you get other buyers to finance the original construction of the buildings, and then you keep profiting year after year off of the properties with none of the risk of owning it. This is not to say that every situation is bad; certainly these properties can appreciate in value (and often do), and the original buyer can make money. Often they don't, and there is no shortage of companies out there trying to convince people to buy into vacation homes. A lot of people bite and end up regretting it later. What I just described is the traditional way things are done; fractional ownership is a new take on the situation and a way many of these companies are trying to expand both overall profits and the pool of people able to invest in these properties.
Fractional ownership is a complicated arrangement, with its own set of risks. It sounds like you have researched them extensively, and believe it matches your situation. It's an "open secret" within the industry that fractional ownerships are the next "time shares," now that time shares have a bad name -- many of the companies pushing these are only too happy to take peoples' money without fully explaining the ramifactions. And the arrangement (and extra risk/management willing banks take on, etc.) does raise the overall price. The companies love that this extra cost is "hidden" because you're dividing it among multiple owners into something that seems more reasonable. But take the total cost of a single fraction, multiply it by the number of fraction owners, and then compare that total to what a similar property would cost if you were buying it outright -- in most cases you'll see a big difference. Sometimes a really, really big difference! That's pure profit for the companies pushing these, which is why they love it so much.
Your scenario seems to make sense, since you have a group of friends you want to go into this arrangement with. And again, it sounds like you have done your homework. It may lower the overall risk. People often will set up an LLC when they want to go into a "group" buy like this, so fractional properties might be an alternative way of doing this. But I would caution that there are many companies pushing fractional ownership that don't have the best interests of the buyers in mind. Anyone considering these properties should do as much research as you have done.
I still question the value of owning these properties outright, though, especially in today's market where we have a real estate bubble. Sure, you're very slowly buying equity (but -- a key point is that equity is spread across all the fractional owners), but at a big cost and with a lot of restrictions. My family rents a luxury vacation home in the Outer Banks each year, and the weekly cost is quite reasonable. These are huge houses that you can fit several families in. We can stay at the same property year after year if we really like it, or we can try new ones. And we can switch our vacation destination somewhere else entirely. It's hassle free, and these houses are much nicer than we would ever be able to afford. There is some charm to owning your own property, but when you're really sharing that property with a bunch of other folks, I think much of that charm goes away. You then get to worry about scheduling conflicts, what happens if another family breaks the TV, etc. In terms of investing money, I think there are much better investment vehicles.
Anyway, I'm pretty negative on the concept (as you can tell!), but I will agree that there are reputable companies and the business model makes sense for some people. Based on your situation, it sounds like it would offer you benefits.
I don't think it would be appealing to me sharing ownership with strangers, but if you went in with a set of close friends or extended family members with the same love of the area it would be a neat idea.
Thanks Scott and Crunchy for validating the positive nature of differing ways to enjoy the slopes. I find it interesting the # of views this has generated...226 in 3 days. Obviously, there are curious people. That is pretty good for this forum! I think it should be debated.
There are a lot of new ideas and some good people out there are trying new ways to enjoy the slopes. A few may be skeptical of something new and I understand Scotts fears. This is not an Interwest deal where a big landowner comes in...builds huge condos...fractions...makes profit. Yes, that would be similar to a timeshare. This is about single family homes, already built, on the market, but to expensive for most people to purchase. Yes, nothing is free. Someone is always making money...realtors, mortgage companies, ski slopes, ski shops etc. Someone has to be a realtor to make a sale. Someone has to broker the mortgage...and yes...if there are 5 families each having a mortgage the mortgage broker would benefit. But, these 5 families would never be able to use/own individually. So there is always a cost. Some choose to rent. They still pay money to someone.
Yes, it is foreign to DC area, but many people are opting for this option across the nation. I personally don't like the typical fraction like Interwest may offer; however, it appeals to many people. I do see the value of the type of fraction I am interested in...I just need a few more interested parties! Hence, my post in this forum to see if anyone is interested.
Crunchy, you are correct in our situation. Friends and family going together. We have 3 families, but need a few more for a premier house. I'm not scared of sharing a legal document and mortgage with people on the slopes. The legal terms protect all.
What if I brought in 3 families and someone else on DC forum brought in 3 families. That would make 6 families sharing a house vs condo. Everyone would benefit and we could have 2 seperate groups operating/sharing a 7 bedroom slopside house under legal terms.
I agree that it would be weird sharing a house, but the 2 groups wouldn't go at the same time. My 3 families may go 2 weeks/month and the other group may go 2 weeks/month. Still, each family has it's own mortage, but the benefit is more usage, taxe write-offs, equity, leaving equipment etc.
Bottom line, all I was interested in is other people who may be interested in joining into a partnership under a fraction to own a great family house.
I still think it says a lot for the number of people viewing this topic. I think there is more interest than meets the eye. Any other thoughts? Thanks Scott and Crunchy! Maybe we'll see each other on the slopes.
I am a closing attorney here in Davis and I attended a seminar in the valley a few months ago regarding fractional ownership. It was mostly attended by realtors, so the realtors in the area are familiar with it and I know a few are very optimistic about its future in the valley.
We'll see how it goes as time goes on. I do remember that this would only apply to homes over 500 or 600K and you would need at least a 700 credit score to qualify.
I was offered an opportunity to enter into a fractional deal as a seller. Basically the fractional company wanted to sell my $200,000 condo in four pieces for $75,000 per quartershare (total $300,000). The idea was that a young inexperienced family could not afford $200,000 for the whole unit, but would be tempted to get in for $75,000 - therefore increasing the size of the potential overall market (and of course the total sales price). Unfortunately for me, there were legal issues, and condo association issues, etc. that could not be worked out. This idea is great for sellers and brokers, but buyer beware. There is a lot of red tape to manage. If one wants to pull together a private arrangement - joint ownership, fractional ownership, LLC - without paying the premium - that's probably a decent way to go. However, I would also caution that best friends can become worst enemies when they get into financial arrangements together. You might be surprised how tight people get when it comes time to get a new roof or a new TV. Sorry to but in.
DWW, no need to apologize...this is what forums are meant to accomplish. The fractional opportunity (which I am looking for interested parties to join) does not allow purchasing under $600,000; thus the young inexperienced family would not qualify. The buyer must have a 700+ credit rating which provides some financial safety in the group.
The problem with joint ownership via LLC and conventional loan (which we considered) is the ability for 1 person to sell or "get out". The entire loan would have to be refinanced and you open an individual not paying their portion. Hence, the rest must pay the mortage. A strict fractional mortgage is a relationship between individual and bank (not dependent on anyone else) AND allows a person to sell that portion for the appraised value divided by the number of joint owners.
As for an increased sale price, that solely depends on the buyers power to negotiate the price and research the market. If people get hoodwinked into this sort of markup, that does not discredit smart buyers. There are always sleezy people out for your money.
Yes, friends can become "not friends" at anytime; however, the legal document set the peramaters to follow. Thus, the TV and roof are part of a strict legal document that all parties agree, prior to closing. I would somewhat disagree with buyer beware. The mortgage industry, closing attorneys and realtors are working thru a lot of issues of past...making this option more feasible for interested parties. Nothing is perfect, but this option has really grown in working thru issues. I hope this forum finds some more interested parties who at least want more information.
I am not interested in fractional ownership, but I am curious about how these properties are managed. Do you hire a management company to do all the accounting for maintenance, utilities, taxes, etc or does one of the shareholder perform this arduous task?
For my condo at T-line, which I bought in 2001, I've already spent more in assesments than my 20% downpayment. Also, maintenance, taxes, utilities now exceed my mortgage after just 6 years of ownership. In short, dealing with all the extra costs of ownership, which are going up, up, up could be a real hassle for fractional owners. What if someone does not pay assesments and fees? Do you put a lien on his or her title? I agree with Scott that renting seems to be a less onerous alternative, especially since I think property values will be flat for sometime.
Great question! Management can work in many ways leaving each fractional group contract unique. The lawyer works with the fraction group prior to closing to solve these sort of questions. The contract can be amended over the years. If the group 1 year votes to hire a management company. Fine. If the group then decides one person wants to manage, they can amend the contract. The contract is legally binding so if someone fails to pay assesment fees (not likely to increase for the time being) the contract outlines procedures.
The nice aspect is the house does not go through rentals. I originally desired to purchase myself, but would have to pay huge sums for rental management. Not reasonable. The inflated prices make it impossible to own (I don't want to spend $800,000 myself), but if I only had to pay $150,000 it was worth the investment to have a nice place. I could feasiblly keep it for many years at that price and not risk real estate loss due to flat rates.
I've been renting for years at a high price. Snowshoe last Christmas cost my family $5000+ just in rental. Then President's Day, Spring Break in Colorado...adds up. I can own a fraction of a ski house and still vacation elsewhere.
If I owned a fraction, I could actually escape during the summer on weekends. I could own a fraction on a ski slope and a fraction on the beach and a fraction on a lake for less than owning 1 large house...but each house would be high end and large enough to accomadate family and friends...and I can still go to the Caribbean. Now, I don't have that kind of money, but you get the concept. No renters to deal with and you get some tax benefits, which renting does not allow.
So, my choice is own a condo (ok, but I got spoiled) pay rent (is that the right way to go?) or get a group of people interested in fraction of a luxury house. I like the idea and hope I can get some interested people to explore the option.
Well, I still think that you might end up happier in a condo. I can't help but see many headaches in store for fractional owners.
Houses in the valley are in constant need of maintenance--the weather puts a lot of wear and tear on siding, roofs, etc. In short, any fractional will have to contend with serious assesments that not everyone will be in the position to afford, which will lead to title liens and "friends" bailing. What if the bank can't sell a defaulted fractional, especially if the title is underwater?
With a condo, you would at least be more of a master of your own destiny. You would not be constantly having deal with liens, defaults, and new shareholder (if you can even find them). I also think you might get a better mortgage rate from a bank, as well as better insurance rates.
Also, $5,000 for a holiday rental is not such a bad deal. I've paid assesments in that range for a very small condo. Also, if you put all your costs in a spreadsheet, I think you would find that you can rent for many, many days for the cost of owning a unit. It will take years to build equity if the market flattens, especially at current interest rates.
I think people should only buy as a luxury, not as an investment. If all you want is housing services for x number of days a year, then renting makes more financial sense. At current prices and interest rates, ski properties in this region don't make much sense financially. The big run-up has already happened, and we'll be lucky indeed if there is not a pull-back in the next few years. Remember, WV runs several years behind DC when it comes to real estate trends.
Tenancy in common can also be used in a 1031 Exchange. I've seen it done in beach vacation areas, large commercial properties and industrial investments. Fractional ownership does have its disadvantages though. Broken friendships, unforeseen liabilities, scheduling time...
IMO, unless you buy in a hot area, buying a property like this as in investment is a *big* mistake. I was part owner of a timeshare once with 5 other people and to this day I consider it the biggest financial mistake I have ever made. While I ended up making almost my entire investment back, it was not worth the hassle. Every little thing become a fight. When it came time to replace the dishwasher it was a 2 month process for a $500 item between arguing over brands and how much we should spend and contractors etc etc etc. Multiply this over 3 years, a lot of angry phone calls and broken friendships and it became a true nightmare for me.
Imagine having 20 first grade kids in a room and telling them all to agree on one thing for lunch. Thats how I define fractional ownership. Only now you have dozens of decisions to make each year.
If I ever did this again I would buy a condo myself or at most go in with one other person. But my wife and I have been very happy simply paying the rental/hotel cost for our holiday travel and enjoying the flexibility of going wherever we want.
The idea sounds nice if you have a tight knit group of people willing to go in on a property, however, I just see it causing way too many headaches all of which have already been stated.
The part I find most disturbing is the scenario where one of your co owners defaults on their loan. Essentially their portion goes into foreclosure. There is no way this does not affect the other owners. At best the lender will sell the foreclosed portion to someone else. At that point you have no control over who now buys in.
The same goes for someone who wants to sell off their share. I'm thinking the market will be thin, especially right now, so it's not like they'll have a lot of choice in buyers. There's no guarantee you'll get someone you can see eye to eye with.
Finally, bad though time shares can be, you're still part of a network where you can trade out your property to stay somewhere else for a week. With this it sounds like you are locked into that location so if you don't use your time you lose out completely. It just sounds too confining.
I am just wrapping up the completion of my home and considering a fractional ownership program. I would like to take a pole on who in the valley would be interested? With all nice homes being 600K plus I think I have setup a program to let DC folks enjoy a weekend home without breaking the bank. Let me know and I will fill you in on the details.
I contacted the people in Colorado to help answer your questions. Thay have helped me through the fractional process. I hope they post information on this site to help others interested in future possibilities learn the basic differences between the various 2nd home ownership options.
I still am looking for anyone interested in this sort of ownerhip options! Please PM if interested.
The folks in Colorado have been a great help to me and they may be able to provide answers to many questions you have regarding fractional ownership. If they don't post as requested, you may be intrested in contacting Steve Gorgon at 970-513-9077. He has been very helpful in my ongoing endeavors. Still looking for interested parties in fractional ownership. Anyone??? I want to set up a phone conference to anyone interested in joining me in ownership!
This thread just keeps getting better......
Dear giantjr et al:
I came across your blog several weeks ago while "googling" for the visibility of my fractional websites on the internet. Your blog and the responses to your post were listed next to one of my sites.
My name is Steve Gordon and I happen to run the Fractional division of the Colorado company, Carteret Mortgage, that you referred to.
I was not surprized at the astounding number of views, nearly 1600, that your post received. The fractional market has been red hot in a cooling market. Fractionalizing a property also has the ability to re-establish property values in a soft market.
I noticed that there was a great deal of legitimate confusion as to what a fractional is, the advantages of fractional ownership, what is involved in purchasing a share in a fractional property and what is involved in converting a home into a fractional property.
I would welcome the opportunity to respond to the questions and concerns posted in the responses to your original post. If anyone is interested please feel free to contact me at 970-513-9077 or MTGSANDBEYOND@COMCAST.NET. I will be glad to speak with anyone whom may call or forward information to you.
If the interest is great enough I will be glad offer a free local workshop, webinar or send a powerpoint presentation on the abc's of fractionalization. You may also want to vist my website: http://www.mtgsandbeyond.com
where you'll be able to instantly access basic information about fractionals.
See what I mean..... ^^^^^
Thanks for the Steve's info but I am not sure that is the best way to go. Getting into a big company like that sets some criteria that wont allow some people the opportunity that I want to. I am just a guy that loves his home in the mountains and since I cannot enjoy it all the time might as well share it with some other people. I think you will spend at least 175K with that company where my buy in is much much less than a condo without all the hassles. The setup seams easy as long as you have an attorney that know what he is doing. West Virginia law seems to be very open so should be no problem with protecting all parties. But... just to cover my butt I will call him to see what they offer.