Fractional Homes as STRs

[Lou Smith]

Has anyone had any success (or horror stories) with fractional ownership of a second or vacation home as a rental?

My understanding is that fractional ownership is different from a timeshare as the buyer owns a portion of the actual home (generally from 1/2 to 1/8), not just a right to use it. So, property value appreciation accrues to the owner and can be realized upon a sale--plus any income associated with the rental of their share. Generally, these are implemented as a special purpose LLC with owners buying and selling out of the LLC--with all owners sharing costs such as property tax, insurance, maintenance, utilities, etc.

Do you think this is good approach to limit the size of an investment, or do the risks of the other owners outweigh any potential benefit?

[Nathan Gesner]

Fractional ownership is a growing market, but I don't personally have experience with it. I just read an article about it the other day and approached the subject with my wife. We agreed it's not for us. We could see splitting the costs of a vacation home with friends or family, but we wouldn't want to share with complete strangers when there's no way of knowing if they would cover their share of the costs, take more than their share of access, maintain the home to our standard, etc.

The idea is good. Instead of paying $300,000 for one vacation rental in Florida, you could pay $50,000 to purchase a share of six different vacation homes around the country! The question is: can you trust the other partners?