Grand Getaways

June 2007 Special Sections

On a trip to the North Shore in 2004, Bruce and Paulette Teigen learned about a new group of homes being built south of Two Harbors. The homes were part of Larsmont Cottages on Lake Superior, a new development featuring fractional vacation ownerships in which the couple and three other buyers could own deeded interest in a townhome set within a resort. For thirteen weeks out of the year, the Teigens could take advantage of a well-designed, fully stocked home on Lake Superior. “We put money down on a three-bedroom home on a gut feeling because it felt right,” recalls Bruce Teigen, who owns Teigen Paper & Supply in Rochester.    

The purchase might have been prompt, but Teigen had done his research on fractional ownerships long before the trip up north. By perusing business and trade journals, he learned that fractional ownerships were a smart way to invest in a vacation home without the hassles—or high costs—of a wholly owned second home. The Teigens also could make some money by renting the home when they weren’t staying there. But perhaps most important, a fractional ownership was something Bruce and Paulette could share with their four children and five grandchildren. “We’re building memories and a history,” the Teigens say. 

More people like the Teigens are turning to resort-based fractional and full ownerships of vacation homes as an alternative to buying a stand-alone second home or staying in a hotel because of the benefits, luxurious amenities, and value.

Ownership Options
Resort-style fractional and full vacation ownerships appeal to consumers for a variety of reasons. Fractional vacation ownerships, also marketed as private residence clubs when operated by luxury hotel brands such as the Four Seasons or Ritz-Carlton, attract those who want a luxury vacation experience for less than it might cost to wholly own a home.

Owning a fraction of a home in a popular vacation setting is not new. This concept started in Colorado ski resorts where purchasing a home was next to impossible given the exorbitant real estate prices. And in light of the fact that Americans only take an average of thirteen days of vacation annually, according to the World Tourism Organization, a fractional makes fiscal sense for many.

The fractional business model differs from a timeshare. Fractional owners have deeded interest in the home, which will appreciate just like any other real estate purchase, whereas with timeshares, only time is owned. The time allotted for staying in your home depends on the size of the fraction you purchase. For example, if you own one-sixth of the home, you can use it for approximately sixty days every year. Even owning one-thirteenth of a home gets you four weeks. The management company of the resort in which your home is located is responsible for ensuring that days are divided up fairly among owners. Some companies will even allow owners to trade time with affiliated resorts.

Another attractive benefit for fractional homeowners is that many property management companies will rent out your home during the time you’re unable to use it and split the rental revenues with you. A homeowners’ association fee covers maintenance, accessory and furniture replacement, and yard work, allowing for turnkey service. For an additional (and nominal) fee, the resort staff will stock your home with groceries or dock your boat prior to your arrival. The luxuriously furnished units, which can range from condominiums to single-family custom homes, feature modern, high-end appliances, finishes, and furniture. Combine these advantages with access to resort amenities, and it’s easy to understand why fractional real estate sales have jumped 219 percent since 1999, according to a study by Ragatz Associates.

Fully owning a home in a resort setting is another vacation alternative that’s gaining momentum. It shares all the benefits of fractional ownership; the main difference is that you are the sole owner who’s entitled to use your home whenever you want in most instances. Resorts will often feature both fractional and full ownerships to attract a variety of customers.