Frac­tional own­er­ship trims va­ca­tion costs

Calgary Herald - Calgary Herald New Condos - - Recreation & Investment Properties - SU­SAN SMITH

Shared own­er­ship of va­ca­tion prop­er­ties got a bad rap years ago with time-shares. High-pres­sure sales tac­tics and a gen­eral lack of reg­u­la­tion turned off po­ten­tial buy­ers. But the con­cept is mak­ing a come­back and new mod­els are be­ing de­vel­oped.

Ac­cord­ing to Jon Zwickel, CEO of the Van­cou­ver-based Cana­dian Re­sort Devel­op­ment As­so­ci­a­tion, stud­ies show va­ca­tion homes are typ­i­cally used 36 days a year by their own­ers. So for those who don’t want the cost of own­ing a prop­erty that may sit empty 11 months of the year, shared own­er­ship makes sense.

“Why buy a whole pizza if you can re­ally eat only one or two slices?” Zwickel asks. His or­ga­ni­za­tion rep­re­sents de­vel­op­ers of all types of shared-own­er­ship prop­er­ties, in­clud­ing time-shares and frac­tion­als. One of the main dif­fer­ences, he ex­plains, is the length of time be­ing pur­chased. Time-shares have tra­di­tion­ally been a week of use, whereas frac­tion­als range from four to 26 weeks per year. Frac­tion­als usu­ally come with a deed of own­er­ship.

While there are no spe­cific sta­tis­tics in Canada on time-shares or frac­tion­als, Zwickel says shared own­er­ship is see­ing a resur­gence.

One chal­lenge in Canada, how­ever, is that the re­ces­sion made it hard for Cana­dian de­vel­op­ers to com­pete with U.S. prices, which plum­meted af­ter the hous­ing cri­sis in 2008.

And, though sales are pick­ing up, the ef­fect of that is still be­ing felt.

One of­ten-cited down­side of shared own­er­ship is that own­ers can have a hard time re­selling.

It’s an is­sue Dianne Houn­some, de­vel­oper-man­ager of The Cot­tages at Port Stan­ton, Ont., has never shied away from. Her fam­ily has been in Muskoka since Cap­tain Thomas Stan­ton set­tled on Spar­row Lake in 1875. She is the fifth gen­er­a­tion of the fam­ily to be in the area’s tourism busi­ness.

“Value-wise, peo­ple won’t get the full amount of what they paid,” she says. “But when we went into it ... we said, ‘This is a life­style prod­uct that you’re buy­ing, some­thing you are en­joy­ing as you go along. Don’t think you’re go­ing to get all your money back at the end.’”

Houn­some started The Cot­tages, which are con­nected to the fam­ily’s Bayview Wild­wood Re­sort, in 2002. There are 18 frac­tional-own­er­ship cot­tages in the first devel­op­ment and four in the sec­ond. Own­ers have use of their cot­tage for five weeks a year — one week in each sea­son and one in off-sea­son. They can eat meals and use the ameni­ties at Bayview Wild­wood. This is typ­i­cal of most frac­tional con­cepts.

When the cot­tages were de­vel­oped, listed prices var­ied ac­cord­ing to style of cot­tage and which summer week was re­served. For a three-bed­room de­tached and semi-de­tached, prices ranged from $49,000 to $95,000. Main­te­nance fees run about $3,000 a year.

Some­one who paid $75,000 ini­tially might ex­pect to sell for about $50,000, says Houn­some, adding that own­ers have been able to find buy­ers for re­sales at her devel­op­ment. Other larger and more lux­u­ri­ous frac­tion­als will see dif­fer­ent re­sults, of course.

Still, Inde Su­mal, vice-pres­i­dent of Res­i­den­tial Mort­gages, Bri­tish Columbia at Royal Bank, says shared own­er­ship pro­vides a cost-ef­fec­tive en­try into the recre­ational prop­erty mar­ket and is es­pe­cially good for peo­ple who want lim­ited use be­cause they don’t have to pay a full year of taxes and up­keep.

He says the rental-pool-re­stricted-use model, where own­ers put part of their time into a rental pool and share in the pro­ceeds, is gain­ing in pop­u­lar­ity and has be­come the eas­i­est type of shared-own­er­ship prop­erty to re­sell.

It’s im­por­tant for peo­ple to use lawyers and real es­tate agents ex­pe­ri­enced in the recre­ational mar­ket when buy­ing a share­down­er­ship prop­erty, he says — and to be re­al­is­tic about how much time they plan to use it.

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