Key Differences Between Fractional Ownership and Timeshares
July 6, 2022 • Co-Ownership 411
Owning a holiday home allows you to enjoy an ideal getaway from the usual routine while still in the comfort of your own private home. For many, it’s a dream that never reaches reality with the realisation that a second home can be rather costly and time-consuming to manage. That’s where the concept of sharing comes in.
For years, we have been sharing elements of our daily lives with others – ridesharing with Uber and renting with Airbnb. In this “sharing economy”, less widely known is the concept of sharing the ownership of a holiday home. This innovative solution offers buyers the ability to purchase a portion of a holiday home, the so-called fractional ownership. This “homeownership sharing model” is not to be mistaken with a timeshare, where you purchase usage as opposed to equity in a home.
Read ahead to explore how each model works – fractural ownership vs timeshare, and which might be the perfect solution for you.
Timeshares are a particularly popular method of vacation home sharing in the United States, introduced in the early 1970s as a way to offload excess condominiums. Timeshare properties are usually an apartment or condominiums located within a resort complex. In a typical timeshare model, buyers pay an upfront annual fee for the right to use a property for a designated period of the year, generally only a week long. While the upfront costs of a timeshare are typically lower than fractional ownership, buyers own no equity in the property and are instead paying for usage.
The fractional ownership model is a relatively new concept, disrupting the current trends in the holiday home-sharing market. Buyers purchase a share in a vacation property, receiving the same benefits of home ownership while sharing in the costs with their fellow co-owners. The duration of time that owners can spend at the home is equivalent to their ownership percentage, and usage times are not designated by the company. At Kō, our homes can have up to 8 individual owners, meaning co-owners can spend at the very least a generous 6 weeks at the home.
3 Key Ways Fractional Ownership Differs from Timesharing
1. Buyers are equity owners
In a timeshare, buyers are simply paying for the right to use a property during a pre-assigned portion of the year. Not only does this model not consider its buyers as owners, but it also provides inferior value for money as buyers have no rights to the equity of the home. Exiting a timeshare can prove quite difficult, and many buyers end up transferring their timeshare to friends or family or selling it back to the timeshare company for little to no financial gain.
Buyers in a fractional ownership model, however, are actually equity owners of the property. Any potential appreciation in the home is divided fairly between co-owners, providing the same benefits as owning any property outright. Owners also have complete control over the price their share is listed at when exiting and the entire sales process can be facilitated by the company.
2. Flexible scheduling
Timeshares are often split into several individual shares, leaving each buyer with only a week of usage time that is typically allocated at the time of sale. While some may enjoy the certainty in scheduling that comes with this, it’s no secret that sometimes life gets in the way. If buyers are unable to make their designated stay times due to unforeseen circumstances, there’s, unfortunately, no way to reschedule and their annual payment is lost.
This isn’t the case in a fractionally owned home, however, which operates under a much more flexible and dynamic booking system. Co-owners are given equal opportunity to schedule their holiday times on their own terms, and also have a larger balance of days to enjoy at the home.
3. Fully managed, value-driven experience
Unlike a timeshare property which is often managed by the staff of the larger resort complex it is located within, a fractionally owned property has a dedicated team to take care of both itself and its buyers. A company that offers fractional ownership, such as us at Kō, helps to facilitate the entire purchase process and appoints an expert team of property services personnel to manage the property. The result is a fully managed and hassle-free experience, where you get to enjoy all the rights of a homeowner without any of the responsibilities.
Experience Luxury for Less with Kō
Kō is an Australian-based company offering an innovative solution to owning a vacation-worthy second home. We’re seeking to redefine holiday home ownership, by offering our clients uncomplicated access to incredible holiday homes in the best destinations the Asia-Pacific has to offer. We’re here to help sellers too, with the ability to purchase your second home entirely or let you retain shares while we source and evaluate co-owners for you. If you’re interested in learning more about how we can make your holiday home dreams a reality, get in touch with the Kō team today.
Disclaimer: Any product information is provided on a general advice basis only. Any advice has been prepared without taking into account any investor’s objective, financial situation or needs. The investor should then consider the appropriateness of the advice in light of their own circumstances before following the advice and seek professional personal advice from a financial adviser.
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