How to Fractionalize Your Second Home

ventanamagazine.com
Author: Sherman Potvin


The 10 essential steps to fractionalizing a home:

If you own a vacation home, then you are all too aware of the limited time that you use it each year and the burden and cost of maintenance and upkeep that you are responsible for all year. Depending on the geographic location, you might want to think about selling your home as a fractional property.

Fractional ownership gives buyers a deeded share in a residence (usually 1/4 to 1/13) with a set amount of weeks each year at the property and use of all of the amenities that it affords. A property management company is generally retained to take care of all of the responsibilities of maintaining the property. And if you don’t want to spend all of your time in that location, you can usually rent out the weeks you do not plan on using or utilize a fractional exchange company to trade weeks with other owners around the world.


1. Evaluate the Home

Consult a real estate broker, a home remodeling contractor, and an interior designer to determine how much it will cost to bring the home and furnishings up to “like-new” condition.


2. Evaluate the Location

Consider how prime the location is for someone on vacation. How many vacation attractions are within a short walk or drive of the property? How many seasons of the year do tourists visit the area?


3. Evaluate the Legal Situation

Hire a lawyer to comprehensively research all local and state regulations that may impact your project.


4. Get Your Property Ready

Have any necessary remodeling done and then focus on the details that make a home comfortable: luxury linens, kitchen supplies, high-speed Internet access, landscaping, etc.


5. Arrive at Your Selling Price

Multiply the Fair Market Value of the home by 0.5 – 1.5 (depending on your home’s location and amenities and the state of the real estate market in your area) to determine the total price for your home.


6. Determine Your Fraction Size

Set the fraction size based on your research of vacation patterns in your area and the price-per-fraction you wish to achieve.


7. Create a Fractional Use Plan

Research use plans so that you have a clear idea of all of the variations. Select the one that makes the most sense for your particular location and your target buyers.


8. Develop a Management Plan

Set up the homeowner’s association and arrange for property management and concierge services. Calculate the yearly expenses so you can estimate each owner’s yearly fees.


9. Develop a Marketing Plan

Develop a diverse marketing plan including direct mail, email, print and online advertising. Consider what incentives you can offer, such as an exchange program. Be prepared to spend 3-5% of the total value of the home on marketing.


10. Perfect Your Sales Pitch

Develop a plan for handling sales calls, showing the home, closing the sale, and handling deposits and down payments. Master the art of “Relationship Sales”.