What is fractional ownership
Fractional ownership has been around since the 80’s. Fractional ownership is not the same as having a time-share. A time-share owner does not actually purchase title for that real estate. When you purchase a fractional, you are actually buying the rights to the title for that real estate. The difference is that you are buying a fraction of the real estate instead of purchasing the entire real estate. The time-shares purchase the right to block out time in a unit/condo/home. This is usually a limited amount of time and then you have to deal with renewal fees and charges. There are no exchange fees or requirements to reserve your unit when you are a fractional owner.
What proves ownership of my property: A law passed in 1993 that permits foreigners to acquire Mexican coastal property through a bank trust (known in Mexico as a Fideicomiso), which is the legal substitute of Fee Simple Deeded ownership. As a beneficiary of the trust, you have the right to use, sell, and transfer or will your ownership. Thousands of Americans have invested millions of dollars in coastal Mexican properties. Title insurance is available from two of the most reputable title companies in the US, First American Title and Stewart Title.
So why would I purchase a fractional unit:
Fractional Ownership allows you to own a fully furnished, high quality vacation property while spending less money on upkeep, taxes, and the initial purchase price with the concept of paying only for what you use. Cost of real estate in Rocky Point has increased at a very rapid pace over the last 5 years. Many of the luxury oceanfront resort condos are just too expensive to purchase the entire unit. Many owners have recognized the need for less expensive investments and vacation properties. In doing so, they divided up their unit/condo/home into 4, 8, 12, or any equal portions. As someone purchases a fractional unit, they become a “partner” in the ownership of that unit/condo/home. Basically, if I was selling my condo for 400K, I could fraction the condo into 4, 100K owners. These 4 owners would each own 1/4 of the time. Most fractional units rotate time between the owners for a calendar year. Each owner has a full week to themselves and the following year, everyone rotates weeks. This ensures that everyone is getting the most out of their investment.
How do I make money on my investment:
A fractional unit is the same as buying real estate. Instead of buying an entire unit, you have purchased a percentage of that unit. You can resell your portion of the unit at any time. As real estate prices grow, so does the price for your fractional.
What are the negatives with fractionals:
A fractional is not the answer for everyone. There are definitely risks and costs involved with the fractional. Units/Condos/Homes in Rocky Point need maintenance, HOA fees, and things break. All of those costs are split amongst all of the fractional owners. You may see this as a plus because you divide up that cost with all the member, however, it is an added cost that you will have. Sometimes, you pay a fractional management company to help manage your fractional. The biggest problem with fractionals is that you normally don’t know your partners. If you get a dead-beat, things could start to go sour. If someone shows up at the unit when they don’t have it reserved and they just refuse to leave. While all the partners can put together strong operating agreement to protect themselves, you always have that exposure.
Fractional vs Time-Share:
A common misconception when a vacation property is divided such as this, is that fractional ownership is the same as time-share. Remember that with time-shares, you are only buying the right to block out time. When you purchase a fractional, you have full rights of ownership, including selling to others, leasing, giving it away, and passing it to future generations. Like any other real estate investments, you will experience real estate appreciation over time with your fractional.
The Right Balance of Vacation Time:
Generally, people understand that vacations offer much to their families. Most Rocky Point destinations offer a seaside recreation area with all of the amenities, and a lifetime of memories. For some people, full ownership can turn into more of a burden than a pleasure. In buying a fraction of a vacation get-away, you can balance your actual use of your vacation home with the appropriate cost of ownership and related expenses!
Full Ownership isn’t for Everybody:
Unless you are retired and have endless amounts of time, you may not get the most out of full ownership. The advantages of the fractional come in when you talk about dividing up maintenance costs and HOA fees between owners. The fractional ownership allows you to enjoy the benefits of an oceanfront vacation without significantly lower costs and lower risks.
The Rapidly Growing Fractional Ownership Market:
The buyer in the fractional real estate market understands these concepts: