Consider fractional ownership property

Fractional ownership of a recreational property may allow you to vacation how and where you want.

The price of recreational real estate in many parts of Canada has skyrocketed in recent years. Cottages, ski chalets, and other vacation properties aren’t as financially accessible as they once were.

If you don’t want to pay today’s high prices for something you may use only a few weeks a year, there may be a more cost-effective alternative. Instead of buying a property outright, you can share. It’s known as “fractional ownership,” and it’s a hot trend.

Different from time-sharing

Fractional ownership gives you outright title to a portion of a property. This is different from a time-share arrangement, where you have the right to use a property, but not ownership. Think of fractional ownership as a hybrid of the time-sharing and condominium concepts, complete with deeded and titled ownership.

Here’s a typical scenario. A buyer purchases a fractional share of a cottage development. The purchase includes a portion of a cottage and land, as well as a share of the development’s assets, such as recreational facilities and common land, and usually comes furnished. Ownership of each individual cottage is divided into shares — typically 10. This gives 10 owners the right to use the cottage for five weeks annually, with time generally distributed throughout the year. There is also an annual fee for taxes, maintenance, insurance, and other services — often in the neighbourhood of $2,000 for each owner.

The benefits

The prime advantage of fractional ownership is cost — you get an interest in a furnished property for a portion of the price you would have to pay to buy the same property outright. There are other benefits as well, including:

You can sell or transfer fractional ownership.
You and other fractional owners determine the function of the management company.
You have no maintenance worries, since landscaping, upkeep, regular cleaning, repairs, and other jobs are done for you.
If you don’t use your allotted time, you can usually rent out the property.

It’s a lifestyle decision

Fractional ownership isn’t always the best option for everybody.

Resort properties are usually developed specifically for fractional ownership. If the idea of spending time in a resort-type property doesn’t appeal to you, this may not be a good choice.

If you want to use a cottage for a considerable time each year or on weekends, fractional ownership may not provide the access you want. And this type of investment can lock you into planned vacation periods every year.

Selling your fractional ownership property works the same as with any other property: you may choose to list it through a real estate broker or sell it privately.

If the advantages of fractional ownership appeal to you in your situation, you could be a candidate. As with all investments, be sure to research your potential purchase thoroughly before you commit.