You’ve done your research and found the perfect vacation property. Because you place high importance on travel and convenience, you’ve chosen a property within the unique and luxurious designation of fractional interest ownership. It’s a smart investment.

Not a destination club, and certainly not a timeshare, fractional interest ownership properties are true appreciating, deeded, high-end real estate.Maintenance-free and with an elevated level of service and amenities, fractional ownership properties offer an economically sensible alternative to buying a second home on your own. These arrangements have true resale value and may allow for high-end exchange options with other fractional interest properties.

There are two genres of fractional ownership. The first is Independent Owners.Generally these are two to four fractional units for one property. The other genre is Developer Owners. The Ritz-Carlton would fall into this category. These properties generally have four to 20 fractional ownership deeds. The breakdown of fractional ownership as far as types of properties looks like this:

52% are ski destinations

23% are golf courses destinations

20% are beach destinations

3% are urban destinations

There are currently more than 250 resort locations across the U.S., Canada, Mexico, and the Caribbean that carry the distinction of fractional interest properties. These locations are set far enough apart geographically to not be associated with destination clubs and timeshare properties.

Although not a new concept, fractional ownership properties have historically been purchased with cash or financed by leveraging other assets, e.g. home equity lines on primary residences. However, since some buyers did not want to tie up the equity in their primary home, or sell a piece of their stock portfolio, there was a void in the buying process, until recently.Financing is now available--albeit through only a couple of companies--at reasonable rates, around seven percent.With common sense underwriting, but with a bit more stringent guidelines, qualifying generally requires credit scores above 700 and higher liquid asset reserve requirements than traditional financing. As is in most cases, borrowing someone else’s money to control an appreciating asset makes financial sense.

Michael Cordle is a strategic mortgage planner and advisor running an office of Clarion Mortgage Capital. michael@integrity-finance.com