Tag Archives: Ownership

Fractional Ownership Ranches

Fractional Ownership, also known as Tenant-in-Common (TIC) is a form of holding title to real property. Under this co-ownership structure, individuals will own an undivided fractional interest in an entire property and share in their portion of the net income, tax benefits, and appreciation. Further, they will receive a separate deed and title insurance for their percentage interest in the property and have the same rights as a single owner.

Fractional ownership is not a new concept. In fact, it has been successfully applied to several industries, including yachts, airplanes, resort condominiums and luxurious second home real estate. The resort industry is entering a period of explosive growth, and luxury fractional resort products are becoming a more significant and recognized component of this industry. According to Omni Brokerage, Inc, TIC real estate investments exceeded $4.0B in 2005. In addition, it has become the preferred investment vehicle for real estate investors who wish to defer capital gains via a 1031 exchange and own real property without the management headaches.

Fractional ownership typically ranges from 1/4th to 1/13th shares. The affluence of the location and the length of the season determine the size of the share. The majority of the recently completed fractionals are located in the Rocky Mountain ski areas, but the concept is spreading rapidly to other popular national resort destinations in the United States, the Caribbean, and Mexico and other international vacation hot spots. The pricing of fractional ownership shares varies greatly and can be influenced by several market factors, including unit size, number of owners, location, amenities and available supply. Typical share prices range from $100,000 to $500,000, but can easily exceed $1.0M for high end Private Residence Clubs (PRC).

Fractional Ranch Ownership

Ranch Partners, LLC is bringing the fractional ownership concept to the ranch real estate sector. We have discovered that the price and responsibility of full ranch ownership is beyond most of our client’s desires and expectations. By packaging ranches into fractional ownership, we are able to serve a significantly larger group of investors and provide a luxury resort experience, while continuing to preserve the western ranching heritage. All owners will have 4-season access to the ranch, 8 to 12 weeks of luxury accommodations and unlimited use of ranch facilities and recreational amenities.

While all fractional ranches have access to outstanding recreational activities, such as hunting, fishing, hiking and horseback riding, individual ranch properties can be developed to meet a variety of ownership lifestyles. Some ranch properties may be tailored to the luxury resort owner, complete with high-end lodging accommodations, full service management, and an assortment of amenities similar to private residence clubs. Other fractional programs may be designed around the ranch operations. These programs provide the owner with the opportunity to live, and play on a working ranch. The accommodations are much more conservative, the lifestyle is more rural and the activities are related to the ranch operations, including horses, cattle, farming and ranching.

What is Fractual Ownership and Why is it Popular for Buying Luxury Items?

Fractual or fractional ownership is the hottest new approach to buying luxury items that an individual would not otherwise be able to afford.

Fractual (fractionally actual) ownership allows a group of individuals to purchase a percentage of real estate, luxury car, resort, vineyard, restaurant, jet, yacht, artwork, or even a fine Rolex. Fractual owners or investors reap all the benefits of ownership, but their investment expense is also smaller so they can afford a larger home, yacht, or several watches.

How Fractual Purchases Work

Luxury homes, condos, and exotic vacation homes are the most popular items for fractual ownership. Typically, the title or deed is divided into shares and those shares are then purchased by a group of investors, usually numbering between four and twelve, sometimes as many as fifteen. A management company is often employed to maintain the property and manage the investment. In some arrangements, the owners actually hold shares of a mezzanine structure or company that in turn owns the assets.

Most fractual properties are set up with an ownership agreement or contract that includes some fees to cover the cost of managing the property, details for usage for each owner, and various other guidelines for renting out one’s share or selling it as well as do’s and don’ts for the property. Some groups are formed among friends or family members working with a lawyer to set up the contract. Others are strangers working through a fractual development company or broker. Either way, a sound, clear and concise agreement is key to ensuring a carefree and hassle free investment. And similar agreements can be created and put into place for fractual purchases other than real estate.

Advantages to Fractual Ownership

Although it may sound like a new name for timeshares, fractual ownership is not the same as a timeshare. In a timeshare situation, the purchaser only owns “units of time,” not the property. Additionally, much of the cost of a timeshare, up to 50%, pays sales commissions. Because timeshare ownership is not linked to the property combined with the fact that they have faired poorly in the secondary market, the value of most timeshares have experienced a marked depreciation of their value.

Fractual ownership of a property entitles owners to usage rights but since they own a fraction of the title and deed, their investment increases in value as the property appreciates. Fractual owners are also eligible for any tax advantages associated with owning the asset. Banks and mortgage companies often treat fractual purchases as second-home purchases making it easier to finance them. Lastly, fractual shares in a property or assets can be transferred or sold fairly easily.

Fractual ownership is growing in popularity for other high-end items including jets, yachts, real estate and jewelry. Many of these opportunities are found with companies online. The Internet has opened up markets worldwide for buying and selling everything from abstract art to collectible figurines to fine jewelry to ski lodges in the Alps or a condominium in Madrid. With the practice of fractual ownership, these investments are becoming available to more people with some degree of a disposable income.