Fractionals vs Timeshare vs Individual Second Home

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So, is it light black, grey or charcoal? Is it close, not to far or a moderate distance.  Well, yes it is.  The debate rages as to whether a second home….notably a vacation home, is a fractional or if its timeshare.  Well, it kinda depends.  Depends on what State you are in… “not state of mind”…  Depends on how many owners are involved and in some cases depends on what type of deed is involved and other statutory and tax codes etc.

Lets boil it down to the simplest explanation and apply some common sense.  If you and your best friend from the club and your brother in-law go in together and buy a beach house jointly,  for each of your families to use as you agree and its not a commercial operation, then, in most jurisdictions, this is simply a second home with three owners on the deed. (We are not attempting to give legal advise.  For your particular need, please consult your legal advisers.)  So that’s simple and makes sense.   What if there are 4 owners or 8- what then?  What if a developer with a real estate license is one of the owners?  What if that developer sold “interests” to others in that property?  What if there are 50 owners…each with a deed?  What if you own points that convert to weeks and there are 50 owners with enough points to own an interest? What if the owners, by deed restrictions etc, are forced to be members of an HOA or POA or COA??  What if a management company owns most of the “weeks” or an “interest” in the home or condo?  It goes on and on…really.

So and again, we are not giving legal advise and are keeping it simple.

FRACTIONALS:  Are generally defined by being a truly luxury, 5 Star, single family property with fewer than 12 owners.  Real Simple.  Most owners get a deed and participate directly in the equity of the property, ie, depreciation or appreciation and share equally in the repairs and upkeep.  According to Jaime Escobar, with Dos Mundos Developments, Inc, fractional second homes are making a big move in the wake of the over-proliferation of low end and hard to resell timeshare properties.

Timeshare:  Deeded:  Very similar to Fractionals except that there may be as many as 50 owners and there may be a forced HOA membership and dues involved.  More often than not, these properties are multi-family or multi-unit in design and are often a step (or two) down in quality. It may also be hard or impossible to participate directly in the underlying equity of the property but this is often overshadowed by the ease of use and the exchange-ability to other properties.

Timeshare Points: An even more “user friendly and flexible” form of timeshare that allows a person to buy and accumulate points to be exchanged for various length stays at various different and various quality properties.  No equity is accumulated but exchange programs exist that allow use of points at thousands of resorts all over the world.  Points can often be exchanged for cruises, airline tickets and rental cars adding to the ease and value of the timeshare.

Taxes:  Property taxes, estate taxes, income taxes, etc.  Not gonna touch this, but anyone involved in any type of fractional or timeshare property (and we are big fans of both), should visit with their tax adviser regarding these issue.

Chris Bounds Austin Texas

For more no non-sense resort stuff, contact Terry Christopher Bounds Austin Texas directly.

 

 

Trash or Treasure?

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OK, so you know and understand that one man’s trash is another man’s treasure.  One man’s loss is another man’s gain.  This is very true with real estate. Especially during and after “crisis” type events.  Sub prime melt down!  Economic recession!  Geo-Political problems!  You also know timing is everything… or at least most of everything.

According to Chris Bounds, Director of Dos Mundos Developments, Inc, in Austin Texas, hurricanes are great opportunities for lots of things…especially real estate acquisitions.  No need to be silly or macobre or act like a merciless vulture, BUT, hurricane damaged areas do produce opportunities for real estate investing.  “Sure, go help with the clean up, donate to the area’s Red Cross and do a lot of praying for those adversely affected by a storm”, says Bounds, ” that’s just what we do.  But we also like opportunities. ”

Storms have a way of shortening the decision time would be sellers (pre storm)  take to finally agree to sell a property.  Also, storms will sometimes expose the weak or marginal owners who were just barely hanging on anyway and give them a way out.  Also, insurance payoffs and or the lack of coverage will also place properties on the market.  My favorites are “under-construction” projects that are in some stage of completion.  Often, lenders and or investors, will second guess the project and may be willing to make a deal.  Those without interim or construction insurance make the best targets.  Properties cut off from or in-accessible to consumers because of public infrastructure issues also create deals.   Overall, damaging hurricanes put more inventory on the market, in concentrated areas, than can be absorbed.  This naturally forces prices down and creates value for buyers.

So, be ready to move faster than normal and be ready to be patient.  It may take weeks to get electricity and water back and months or years to gain access down certain roads or across bridges, but the earth will keep spinning and consumers will return to the market…not to mention lots of federal, state and local funding will find its way into the damaged area. hurricane harvey

For more no nonsense real estate talk, contact Chris Bounds directly.