Questions and Answers Regarding Fractional Ownership
1. Q. What is “fractional ownership?”
A. Fractional ownership is a term used to describe shared ownership of assets with usage rights based on time. With fractional ownership only one owner is allowed to use the assets at a particular time. Each fractional owner also pays only a fraction of the costs and ongoing expenses of the assets.
2. Q. What do I actually own when purchasing a fractional interest?
A. Fractional real estate ownership is very much like ownership of your principle residence, except that you co-own with five (5) other owners. As a Frazionata fractional owner, you will become a 1/6 shareholder in a limited liability company (assuming you purchase one share), so you will own stock in a LLC. You are able to sell or bequeath this ownership interest in the same way that you might transfer your principle residence. The six (6) owners are all parties to the LLC’s Operating Agreement, which sets forth the terms of ownership. If the value of the home appreciates, the value of each share of the LLC will likewise appreciate.
3. Q. How much time will I have each year?
A. Because most second home owners typically visit their second home annually, we have designed a fractional ownership plan suited for vacationers from every continent. Fractional home owners will select a defined and fixed sixty-day time period (consecutive days), best suited for their maximum enjoyment and use.
4. Q. Who will manage and maintain the assets? Who will pay all the bills?
A. Frazionata will professionally manage your fractional property at least initially. We have a wealth of local knowledge and professional management experience; however, as an owner you are able to hire other property management companies if you prefer.
5. Q. May I rent out any of my designated weeks?
A. Yes. One of the additional benefits of fractional home ownership is the ability to rent your assets for your occupancy period, or some subset of that period.
6. Q. Can I swap weeks with other owners so that we can come to South Florida at a different time, or more than once per year?
A. Yes, owners can trade part or all of their sixty-day interval time with one another during the year. Fractional owners can either contact each other directly or make such arrangements through our concierge service.
7. Q. Who are the other fractional home owners with whom I will share home ownership?
A. You will own your luxury fractional vacation home in partnership with other like- minded people who want to own a second home and who recognize the value and benefits of fractional home ownership. Most fractional home owners are well-educated, professional people with strong annual incomes and net worth.
8. Q. How do I sell my fractional ownership interest should I choose or need to in the future?
A. Because you have an ownership interest in your property, you can sell your fractional interest just as you would any other residential home. Frazionata can help facilitate this for you.
9. Q. How much does a fractional ownership interest cost?
A. Frazionata offers four Lifestyle Packages ranging from $389,000/share to $1,990,000/share. All packages include a high-end home, a sport yacht, either a 39ft Sea Ray Sundancer or a 53’ Ferretti, and a Mercedes-Benz GL450 seven passenger SUV. The price per square foot for a fractional vacation home in Florida is well below the national average for comparable properties in desirable resort destination venues.
10. Q. Is fractional financing available?
A. No. Because the ownership interest is a “share” of a corporation, our buyers pay cash. Of course, many people privately finance by using their home equity lines of credit or by reallocating a portion of their portfolio.
11. Q. What happens if there is damage to the home?
A. Frazionata will ensure that any damages are repaired in a prompt manner by qualified local professionals, so there is no interruption to the enjoyment or use of the property. If damages were caused by the owner or vacation renter of the owner of one sixty-day interval, such owner will be fully responsible for all charges. The other fractional owners will not be responsible for any portion of this type of damage.
12. Q. What kinds of services come with Frazionata packages?
A. Each shareholder is designated a personal Concierge representative who performs all standard concierge services in addition to providing limousine transportation at the beginning and end of your stay, stocking the home with personalized foods prior to arrival and ensuring a thorough cleaning of the home between occupancies. Frazionata also provides property management services ensuring that your assets are properly maintained and repaired, that bills are paid on time and facilitating any inter-shareholder communications.
13. Q. Does Fractional Ownership qualify as a 1031 exchange property?
A. Depending on the nature of your ownership, you may be able to involve your purchase of a fractional property in a 1031 exchange. As the applicable tax laws governing 1031 exchanges are complex, you are encouraged to discuss your specific situation with your tax adviser.
14. Q. How is Fractional Ownership different from a timeshare?
A. Fractional ownership is quite different from timesharing. Timeshares offer benefits to those who are interested in vacationing one to two weeks a year and don’t mind competing for space at their preferred destination. Luxury fractional home ownership is different in the following ways:
i. An ownership interest in one vacation property (single family luxury residence), vehicle and boat with rights and benefits consistent with any other real estate/car/boat purchase;
ii. A higher level of luxury furnishings, services and amenities;
iii. The security of knowing that you can return year after year to your own private residence;
iv. A greater chance of long-term property appreciation in your real estate investment as compared to timeshares which historically lose value after the initial purchase;
v. A longer period of time spent at your private vacation property;
vi. All important decisions are made by you and the other fractional owners of your property, not by a corporation, developer, or property management company; and
vii. Pride of ownership.
15. Q. Is it possible to fractionalize an existing vacation home?
A. Yes, shared ownership is increasingly popular among those who already own a vacation home (or even a primary residence in a resort community) but feel burdened by the expense, upkeep and management of the property. Rather than sell a home they love, these people often opt to sell one or more fractional interests to others who will use the home when the original owner does not and will help share in the costs and burdens. Besides lowering cost and time burdens, shared ownership can free up capital for the purchase of other resort property, or for alternative investments. It can also provide an alternative when selling the entire home proves difficult due to market conditions. If you are interested in selling some portion of your home, please contact us for more information.Sellers