How to Live With Luxury Through Fractional Ownership

Do you want a more plush lifestyle -- but lack the million$ in ready money to bankroll it? You've worked hard and you've done very well, but the corporate jet, the yacht and the $4 million beach house are out of reach for now.

Fractional Ownership may be the answer to your quandary! With fractional ownership, a costly asset (jet, yacht, vacation home, classic car) is jointly owned with a group of other people; each owns a percentage share of the asset and has defined rights and privileges pertaining to its utilization. A management company provides the continuity and organization to allow share owners effortless and predictable access to the asset.

This idea works well with many types of assets that may be used periodically. For example, second homes are occupied by their owners 2 - 4 weeks out of the year on average. If you've visited a marina of late, you've most likely observed that a good amount of the slips are occupied by boats - i.e., they are not being used. Corporate jets remain idle until the executives require travel.

Fractional ownership offers you, the share owner, dependable access to that luxurious asset you want or need but are not inclined to pay for 365 days a year. And, because you belong to a collection of owners, all maintenance, management, upkeep and repair costs, taxes and insurance are shared among the group. The management company schedules owners' usage, and takes care of routine maintenance, accounting and repairs.

In short: you have what you want, when you want it -- minus the headaches, expense and liability of full individual ownership.

Many businesses offer fractional shares of corporate jets (flexjet.com, netjets.com); turboprop aircraft (avantair.com); and helicopters (heliflite.com, sikorskyshares.com).






Fractional ownership of luxury boats and yachts -- both power and sail -- is widespread. Companies like monocleyachts.com, eusamarine.com, and seanetco.com provide fractional ownership of yachts on the East and West coasts, in the Caribbean and in the Mediterranean.




Classic automobiles such as the Lamborghini Murcielago, Lamborghini Gallardo, Rolls Royce Phantom, Bentley Continental GTC, Aston Martin Vanquish S, high-end Porsches and the Ferrari 360 Spider are accessible through fractional ownership with various companies such as extremecarshare.com, curvyroad.com, and clubsportiva.com. Fractional shareowners in these clubs may choose a membership that lets them to rotate their ownership among the different cars in the fleet, rather than only being in possession of a fractional share of one classic car.

RVs are another category of luxury item that often sees only periodic use, so wisdom dictates fractional ownership here too. Both coachshare.com and sharerv.com offer fractional shares of Monaco luxury coaches.

Racehorses have long been owned by syndicates -- groups of owners who join together to spread the expenditure and risk. Associates of syndicates were often friends or business acquaintances who knew each other and privately set up the syndicate. Now fractional ownership models are coming into play.

In Britain, the 2005 Vodafone Derby winner made racing history: Motivator, the winning horse, did not belong to a super-rich breeder or celebrity, but by a syndicate of 230 people from the smart-moneyed classes.

The fractional ownership idea is being creatively extended in a lot of areas. Wine Estate Capital Management makes fractional ownership of vineyards in France and South Africa available to interested buyers. Art donors are finding it helpful to make a contribution of a fractional share of their art to their preferred museum, thereby ensuring the museum's continuing enjoyment of their collection for part of each year.

Luxury purses are now available for fractional ownership, so if you want to diversify your collection without buying them all, your quandary is resolved. Shouldercandy.com offers handbags by Chloe, Balenciaga, Louis Vuitton, Prada, Burberry, Marc Jacobs, Chanel and more.

Vacation homes present the most prevalent use of the fractional ownership concept. After growing in popularity in Europe, the system first spread in the U.S. to ski resorts, then to the East and West coasts. Now fractional vacation homes are being developed all through the country, particularly in Florida, in golf developments and in additional resort areas.

In addition, fractional ownership is offered at destination or residence clubs being constructed and managed by various major players -- Ritz Carlton, Starwood, Four Seasons, Hyatt and others. These companies manage large resorts in California, Florida, and the East Coast. Residence clubs also exist on a smaller scale, frequently as a portion of a hotel or residential development whose major purpose is to house short-term guests or to sell homes to individual buyers.

Despite the diversity of forms a fractional ownership vacation home may take -- from luxurious single-family coastal properties to what are essentially 5-star hotels and resorts; from coastal condo developments to residence clubs that are a portion of a larger development -- all together they share numerous general characteristics.

Most significantly, fractional ownership is not a timeshare. The distinction is that a fractional share owner has possession of a deeded share for a percentage of the property. On the other hand, timeshare "owner" is permitted to access his property for specific periods of time; he does not have ownership rights in the property.

An alternate structure that is occasionally used for single-family vacation homes is the Fractional Property LLC, in effect a holding company in which each share owner has an equivalent interest.

Whether the fractional share owner owns a deeded fraction of the property or a share in an LLC, there are numerous advantages. If the property appreciates, owners' shares also go up in value. Share owners can buy, sell, trade or otherwise convey their fractional share of the property. Share owners, as part of the Property Owners' Association, have say in choices affecting their property. There may be tax advantages to the share owner from deducting mortgage interest or the fractional share of the depreciation on the property.

A number of fractional vacation companies administer properties in diverse parts of the world. Owners can buy a fractional share in a single property, but are allowed to trade access to their vacation home for use of a property in a different location.

Fractional ownership vacation homes are managed by a property manager who administers all business affairs, sets up scheduling of owners' visits and may take care of various matters to make the owner's arrival uncomplicated and smooth. Owners' individual things may be taken out of their private storage area and placed in the home, ready for their arrival. The refrigerator and liquor cabinet may be supplied with specified items; tee times, tennis lessons, child care, spa appointments and charter fishing can be arranged.

A fractional share of a vacation property entitles the owner to a specified amount of use of the property. A 1/13 share means the owner enjoys four weeks in the property per year; a 1/6 share entitles one to eight weeks every year. Some fractional properties have a set calendar, with owners' weeks revolving in the course of the year; consequently there is fair allocation of favorite holiday times. Some developments permit owners to trade time among themselves; others have clearly defined bidding procedures where an owner may have numerous fixed weeks per year and a number of floating weeks, that are determined year by year.

All the details of the legal and monetary structure of the fractional vacation property are clearly laid down in the deed, LLC Operating Agreement, and other management documents. Most fractional properties have a regular fee assessment that provides for operating costs, administration, taxes, insurance, repairs, landscaping, and a fund for replacing furnishings. Annual accounting of all costs and budget projections for the approaching year are made available to share owners for approval and input.

The rising popularity of fractional ownership vacation homes is explained by the striking advantages they afford -- particularly, that of having access to a luxury vacation home minus the expense, liability or headaches of owning it outright. No repairs, no shopping (unless you want to), no worries. All the owner has to do is show up, unpack the suitcases and - enjoy.

Financing options for fractional vacation properties will be covered in a separate article.

More resources on fractional ownership.

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