We aim to give you the facts on the significant differences between fractional ownership vs timeshare so you can be up-to-date and make an informed decision if you’re considering either of these options when looking to spend quality vacation time with your loved ones.
While fractional ownership and timeshare are sometimes grouped together and often referred to as shared ownership agreements in the same breath, they are distinctively different. And, as always, in all industries, there are good and bad companies, so always do your research. Start here with our in-depth yet scannable guide to timeshare vs fractional ownership.
Key Differences Between Fractional Ownership and Timeshare
The main difference between fractional ownership and timeshare is the actual ownership. With fractional ownership, you own a portion of the property and have more flexibility in terms of usage and resale. On the other hand, timeshare typically involves owning the right to use the property for a set amount of time each year, with less flexibility and no rights to any equity in the property.
What is a Timeshare?
With a timeshare, you are buying the rights to a share of time in which you can use the property (usually within a hotel or resort), and accommodation unit, hence the name: time-share.
You do not own a piece of the property—which remains with the owner(s) of the building(s). Nor do you own a deeded share of the property. A deeded shared interest also does not mean you own any of the property.
What Is Fractional Ownership
While fractional ownership can apply to multiple luxury assets, we are using fractional real estate ownership in our example—for people looking at the fractional property ownership model to purchase a vacation home. The process is simple and probably why its popularity is on the increase. Potential buyers can buy a fraction, such as 1/8 or 1/12 of the freehold property, and pay a lower purchase price for this share (in a higher value property) than if they were to buy outright since there will be up to 12 co-owners.
What Is the Difference Between Fractional Ownership vs Timeshare?
If you’re still undecided whether fractional ownership or timeshare suits your lifestyle requirements better, then we suggest that your primary course of action should be to look at your budget, ascertain how long you wish to use your vacation home, and decide whether you’re looking at it to generate you a return?
Here we’ve highlighted the 10 key differences between fractional and timeshare properties that we’ll cover in more detail.
|Fewer owners (usually up to 12)||More owners (typically anywhere from 26 to 52)|
|Less wear and tear||More wear and tear|
|Own a deeded share of the property asset and 4-5 weeks of usage a year||Own solely a specified amount of time each year|
|Own for as long as you wish to keep the property||Expiry of usage entitlement after a set number of years|
|Shared cost of maintenance and annual running costs||Set maintenance fees charged by management monthly or annually, rising each year|
|Quality, large properties with high-end finishes||Smaller units within a hotel or resort|
|Quality properties can expect capital appreciation over time||No capital appreciation, only depreciation|
|A luxury vacation home for less than whole ownership||Often more cost-effective than booking hotels for each vacation|
|Personal effects on display and safely stored||No personalization as used by many|
|Properties often come with private swimming pools, gardens, and private dining possibilities||Shared amenities but often more facilities including restaurants, bars, and entertainment|
Number of Owners: Wear and Tear
Who are you sharing your vacation property with over time? Here we see a stark distinction between the number of owners and usage when we compare each process. You won’t typically find more than 12 co-owners of a deeded fractional property, but each timeshare unit could see up to 52 owners.
Each Fractional ownership share typically comes with 4–5 weeks each year, while the right to use a timeshare can be as modest as one week. What effect does this have on the properties? Well, it doesn’t take a mathematician to work out that the wear and tear of the accommodation used more frequently will be higher, but along with this comes the pride of ownership.
Cost vs Usage
Owning the rights to a timeshare can often include seven nights a year at your chosen property. While the initial cost is much cheaper than owning fractional property, and however much you love your apartment with its beautiful view of the beach and dazzling waters, not everyone will be the same. Sometimes, and with in excess of 50 owners per accommodation, there can be a feeling of indifference towards the property and accommodation. Often the vacation is a priority—trying to pack in as much in seven days as possible, leaving little thought towards the place you sleep each night. The high traffic of guests throughout the year will ultimately take a toll on the wear and tear of the overall property.
Fractional ownership properties are synonymous with high-end luxury materials, state-of-the-art finishes, and fixtures. Every visit will be as immaculate as the last, with the property management company ensuring that your vacation home is in top condition. With up to eleven other like-minded co-owners, you can enjoy your home-from-home by leaving some of your home comforts and effects on display when you arrive and securely stored after you leave.
Timeshare vs Fractional Ownership: Advantages and Disadvantages
Let’s get into the detail of what some people like and dislike about two completely different ways you can secure your future vacations. Whether it’s the location you love or the privacy of your own home, or, indeed, the liveliness of a busy resort, we’ve highlighted the most documented advantages and pitfalls to owning a timeshare or fractional ownership. By the end, you will be knowledgeable about the differences between the two and decide which is right for you.
Advantages of Timeshare
- Guaranteed annual vacation at the same time of year
- Enjoy extensive facilities in the larger resorts
- Less initial capital outlay than for a fractional property
- Often opportunities to exchange to other properties and countries
- Rental opportunities
Disadvantages of Timeshare
- No equity owned in the property
- Shorter stays
- No personalization of accommodation
- No capital appreciation
- The developer retains ownership of the entire property
- More wear and tear
- No personal attachment to an accommodation that is used by many
- Timeshare value depreciates over time, and maintenance costs rise
- The timeshare industry has a tarnished reputation that has been hard to shake off, still causing an adverse reaction today due to some unscrupulous operators over the years
- The rights to use the time will expire after a set period
- Often difficult to re-sell
While sometimes a more cost-effective choice for families than booking a holiday direct, timeshare guests are still that, guests at the resort. Large hotel brands have entered the timeshare market. However, it has done little to alter the industry’s overall reputation, with people still being skeptical when they hear the word ‘timeshare.’ So, more and more, we are seeing the traditional timeshare companies rebranding using the phrases destination clubs, residence clubs, private residence clubs, and even fractional timeshare ownership.
Remember – it is only fractional ownership if you own a fraction of the title deed of the asset!
Advantages of Fractional Ownership
- You own a fraction of the asset
- Accessibility to higher price tag properties for less
- More affordable than buying a property outright
- Only pay your share of annual expenses and maintenance
- Highly finished and designed properties in idyllic locations
- Benefit from a part of the property appreciation over time when coming to sell
- No hanging around – arrive and begin your vacation immediately
- Personalized relationship with the property management company who will know your requests and create a home-from-home with your personalized effects on display
- Used by fewer owners than a timeshare, so less wear and tear
- Rental options to generate income
- Resale options through the management company, a pool of owners, and real estate agents
Disadvantages of Fractional Property
- Return to the same destination every year (This could be an advantage too!)
- You will be sharing the property with owners you most likely won’t know
- No change to property décor
- You must book your stay through a rotation calendar via the property management company, as do your co-owners
If you’re considering buying a second home abroad through fractional ownership, now you can read all the pros and cons and understand the clear difference between fractional ownership and timeshare to see if fractional ownership of real estate is right for you.