Timeshares vs. Fractional Ownership

As the name suggests with timeshares, you are buying time not real estate. With a timeshare, you are dividing the time at your home with up to 52 owners, and the purchase price you pay has been inflated so aggressively it is difficult, if not impossible, to recover your initial investment.

The main differences between timeshare and fractional ownership are:

  • Timeshares grant as many as 52 parties the right to use a given property for a week annually. Elite owners – typically 6 per property – actually own the home itself and have 5 – 10 weeks to spend vacationing at their home.
  • Timeshares are usually located in hotels or condominium communities. Elite’s fractional homes are stand-alone homes and villas, except in cities like Paris and New York.
  • Timeshares are typically priced at 3-10 times the actual value of the underlying real estate, forcing users to pay a premium for less-than-premium properties. By contrast, our fractional homes are priced to reflect their intrinsic value, plus a modest 20% markup at the time of development.
  • Timeshares have assigned weeks. Weeks are not assigned in Elite homes. You get to choose when you want to use the home, and it can vary from year to year.
  • Timeshares require a seven-night stay. As an Elite owner, you can stay as long or as short as you would like.
  • Timeshares and Elite fractional homes both provide exchange opportunities.

Private Residence Clubs vs. Fractional Ownership

Private residency clubs, which are often known by their acronym PRC are run by highly respected hospitality companies, such as Marriott, Ritz-Carlton, St. Regis, Four Seasons, Hilton and Starwood, and enjoy first-class amenities. However, these homes are often units in a resort or a multi-unit building that have been developed exclusively for the purpose of a fractional ownership model.

While these models do typically allow for deeded ownership, it can be difficult to realize the benefits of one’s investment due largely to the developer’s high profit margins and the management team’s corporate overhead and marketing budgets.

Historically, the prices of PRC’s range from $200,000 to upwards of $2,000,000 for 4 weeks of use. By contrast, Elite Destination Homes offers prospective buyers a price that is more closely related to the intrinsic value of the property itself.

Destination Clubs vs. Fractional Ownership

Destination clubs and fractional ownership are two are very different models. The biggest difference is that you do not actually own anything in a Destination Club; you are actually paying for access to use the club’s vacation homes. With fractional ownership, you actually own real estate.

Destination clubs resemble country clubs – members that are charged a large initiation fee and annual membership dues to gain access to the club’s vacation homes. They often rely on a constant influx of new members and their cash – a model that degrades exclusivity and, inevitably, the users’ experiences because there are too many members, and the homes you desire are not available for you to use.

Exiting a destination club may take a long time, as you get put on an exit waiting list and are only allowed to leave when a certain number of new owners have joined the club. This creates long waiting lists that may take a few years for you to reach the top.

In the event that a destination club fails, its members’ investments are at risk. In 2006, there were 23 major destination clubs worldwide. Since then, only three major clubs have not gone through a merger, major restructuring, or bankruptcy. The financial impact on members of these troubled clubs has been serious, ranging from special assessments and increased annual dues, to the loss of all of their money, which typically ranges from $300K to $600K.

In contrast, Elite Destination Homes’ simple, fractional ownership model is actual ownership of a second home with a few other like-minded families with a clear operating agreement governing the home, including the ability to sell your home at any time.

We hope this overview of the various types of ownership is helpful.

For further clarification, feel free to contact us.

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