April 19th , 2010 → 8:20 pm @ admin // One Comment

Post by: Les Nunez

Fractional Ownership has been around a long time, especially in the USA where it is a multi-billion dollar industry, but most people in Costa Rica are just becoming familiar with this approach to buying and owning property. It is a very simple and cost effective way of owning a second home without all the hassle and cost of running and maintaining it.

Now you can realize your dreams of owning a pied-a-terre in Costa Rica, your condo on the Pacific Beach or your fabulous view property in the Valley.  Buying a fantastic, renovated, fully furnished beach house with a swimming pool and steps to the Beach is out of most people’s reach but buying just a few weeks in that property suddenly makes it much more accessible!

Fractional Ownership is the new, exciting and smart option for second home ownership.   It is the difference between whole ownership, with its sole responsibility and full exclusive use, and the commonly thought of time-share, where most often, you purchase “vacation time” in a resort, (usually about two-weeks) not in the real-estate itself. And just as savvy investors continue to buy stocks in the global market to balance and strengthen their portfolios, Buyers can now invest in properties that are a strong value in the global real estate world.

How does fractional ownership differ from time shares?

Both the arrangements known historically as timeshares, and the arrangements now referred to as fractional ownership, fall within the legal definition of a “timeshare” in most U.S. States and Canada. From a strictly legal standpoint, the term “timeshare” refers to any arrangement under which a group of people shares use of a property based on time, regardless of whether they own the property and regardless of whether a management company or developer is involved in organizing or operating the property. But from a practical standpoint, there are significant differences between most of the arrangements historically referred to as “timeshares”, and most modern vacation property fractional ownership arrangements.

Put simply, the meaningful difference is the extent of ownership and control given the users of the Property. Modern fractional ownership almost always involves direct ownership, meaning that each user has a deeded interest, and this usually means greater owner control. Some often used phrases to describe fractional ownership are ‘multiple parties owning an asset’ or ‘shared ownership of an asset in perpetuity’. This differs from ‘time share’ in that the asset is actually owned by you, rather than having just a right to use time in a development for a limited period. You have the right to sell or gift your share in a fractional ownership development and it could appreciate over time. You are free to set a sales price based on market conditions. The management and maintenance are provided for you.

Not only is fractional ownership an idea whose time has come; because of its economic value, but also very importantly it is for the EXPERIENCE it allows an owner to have by living and connecting more deeply with the lifestyle and culture of Costa Rica.

A Lifestyle Asset You Can Buy and Sell: With a fractional vacation ownership property, you own a share of the property, not just usage rights of properties. And just as savvy investors are buying stocks in the global market to balance and strengthen their portfolios, Buyers can now invest in properties that are a strong value in the global real estate world. There are a number of ways of structuring a fractional ownership development; one method is to have a Costa Rica based company own the property. There are 52 shares corresponding to the number of weeks available. Clients can buy as many shares as they wish and time will then be allocated in the property to correspond to the shares purchased.  In simple terms ‘the company owns the property, the shareholders own the company’. By structuring it this way you are able to avoid the normal legal and tax issues associated with purchasing a property in Costa Rica.

To ensure that all owners get equal access and use of the properties throughout the years of ownership there is a Rotating Calendar (RC). This calendar will set your fixed weeks and move your floating weeks each year so that you will enjoy the seasons or it will provide you with rental income which gives you an ROI.  This is the fairest way of assigning weeks and the starting point will be allocated on a first come first served basis. Two weeks of the year will be held in ownership by the developing company for maintenance purposes and where possible to assist owners to swop weeks.

With fractional ownership you have the usage rights for 30 days or more each year, pay for only your share of the operating costs, own the real estate and stand to gain from the appreciation. You can sell, will, or gift your share of the property when you want. You are free to set a sales price based on market conditions. The management and maintenance are provided for you.

Fractional Real Estate Glossary

Many vacation fractional ownership properties will offer a variety of usage calendars and models.  The Fixed usage is defined as time that is purchased and permanently assigned to you.  Other terms you will encounter Floating Weeks, Reservation Agreement, Private Co-ownership, One off Developer, Condo-Hotel, Management/Maintenance Company, On site Owners Storage Units,  Departure Fees, Maids Fees, Mixed-use development, Occupancy Rate, Space Available  to name a few.

The properties are usually fully furnished to a very high standard, as you would your own home, they will not look like holiday rentals. The aim is to attract an affluent customer, people who are seeking a lifestyle for a vacation home and with the fractional means to make the purchase or aspirational customers who want to share in something they cannot buy outright. They can afford a fractional but now really do have to evaluate it financially. These are the ones sitting on the sidelines today watching and waiting for the economy to change.

Costa Rica along with this form of ownership is set to explode, however not all developers understand and can provide for this niche market, but they are aware of the need to appeal to customers. Our clients come to us for the same reason, they need more buyers. The old adage of ‘build it and they will come’ does not happen in fractional ownership, it revolves around a more complex marketing environment. However, from an Owners perspective, all you have to do is:

Arrive, Indulge and Relax – Brilliant.

WELCOME HOME!

Tags: Costa Rica, Costa Rica Real Estate, Fractional Ownership