Fractionals - The New Timeshare

How would you like to get more than retail in today’s commercial real estate market? It’s about finding the right property and selling it to multiple owners, for a fraction of the total cost, but getting 1.5 to 3 times the value of the property!

This won’t work for all properties. Locations like ski-resorts, or golf resorts, or beach resorts is where you want to look. Basically, it has to be where people want to come to play, stay for a few weeks each year, and return home. There are certain properties that will fit this model. These include high-end, luxuriously resort properties. These properties can be single family homes, or condominiums. But they need to be in areas where there is an attraction for people to visit.

People buy fractionals because they actually get a deed with a % of the ownership. They can get a mortgage - enabling tax benefits and they’ll be able to take advantage of appreciation. Many of the homes are tied into Private Residence Clubs which allow owners to exchange their weeks with other resort properties all over the world. They can sell ownership. They may even qualify for a 1031 exchange!

Timeshares – no deed, no tax benefits. You are only eligible for a week or two and usually the properties are not in high end resorts.

Here’s an example to see how the numbers work out. You buy a 30 unit condo on the beach . Each unit would sell for about $1 million or $30,000.000. Now, lets fractionalize it. You sell to six owners which would give each owner the opportunity to stay in the condo for up to eight weeks each year. NOW, lets do the math. We sell each share for $350,000 and if I’m doing my math correctly, this means that you would have a gross profit of $63,000,000 instead of $30,000,000. 6 owners x $350,000 x 30 condos. = $63,000.000. Sweeet!

Bottom line - if you are an average investor who doesn’t know that this exit strategy exists, you could buy it for retail and make a decent profit. I don’t know about you but I’ll take $63,000,000 over $30,000,000 any day of the week!

This is a great exit strategy because most people who own vacation homes only spend a few weeks each year there. Buying a fractional provides the owner the flexibility they want at an overall lower cost.

As a commercial property scout look for those properties and keep in mind that the best and highest use just may be fractionals.

For more information go to http://nacreps.org/

Scouting the country for deals,
Kim
http://turn.dirtintocash.com/