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Pros and Cons of Fractional Real Estate
Vanessa DellaPasqua, Helium Report
From a product and service offering perspective, purchasing a fractional property and joining a private residence club only make sense for certain types of customers.
Feature: Private residence clubs normally offer members 20–60 days of usage, depending on what fraction the member owns (ranging from 1/6 to 1/12 fractions).
Pro: Guaranteed availability at specific times of the year for a specific location; guaranteed 20–60 days occupancy.
Con: If you’re using your property less than 20 and more than 60 days per year (for example, if you’d like a second vacation home for half the year), joining a PRC usually doesn’t make sense (although some clubs offer 1/2 or whole ownerships in units).
Feature: Some private residence clubs offer exchange programs with other clubs in different locations.
Pro: Variety of portfolio destinations allows you to vacation in different locations.
Con: Exchange programs can be unreliable, as availability at other properties is not guaranteed. Members shouldn’t depend on or plan to trade usage days of your property for usage days of another property.
Feature: Nearly all private residence clubs are located in a particular resort and hotel settings.
Pro: Enjoy the same service offering with more personalized service than most resorts (e.g. PRCs will pre-load units with members’ pictures, clothing, equipment and other personal belongings)
Con: The resort/hotel setting is not as exclusive as a more private vacation property (e.g. a secluded home).
Feature: Most clubs allow members to use multiple units if they bring more guests than one unit can handle.
Pro: The occasional larger party can be accommodated in the same location/resort.
Con: Large families or customers planning to travel with a larger party as a rule might find the PRC too expensive and cumbersome.
Feature: Private residence clubs are based in one location.
Pro: Consistent quality offering and longer time periods at the same location.
Con: No variety in terms of location; if you desire to stay at multiple properties throughout the year and have no interest in spending 20–60 days in one place, this model is not for you.
In summary, from both a product/service and investment perspective, owning a PRC membership makes sense for certain types of customers, depending on the customer’s unique situation aligning with the product/service offerings and costs of a particular PRC. Hence, it is important to understand what you desire in a vacation property, what PRCs can offer you, how much membership will cost and what your alternative investment option is.
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