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News Notes
Second Property Types Compared
Posted May 21, 2007 05:05 PM by Connie Talcott SmithVacation and second property markets have grown considerably in recent years. The National Association of Realtors reported that nearly 40% of all purchases in 2005 were not primary residences. Responding to this demand, developers continue to build new property for this market and convert hotel suites into individual ownership opportunities. This is particularly true in Florida and real estate agents need to know how to serve buyers for this market.
Newconsearch.com helps agents find such properties. Under STYLE in the blue POWER SEARCH bar, agent subscribers will see the "Vacation Property" option with specific styles under it. These include Condominium, Townhome, and Single Family options, found in resort areas, where deeds allow short-term rentals. These styles also include Casitas which are small, free-standing structures, individually owned, typically on the grounds of a resort.
Fractional Ownership and Hotel Condominiums have been the subjects of the last two articles in our series and they constitute the remainder of deeded property ownership opportunities. Below you will find a comparison chart of these two styles along with non-deeded "Time-Shares," a style we do not post in our database.
For more information, agents may refer to the NAR Field Guide to Vacation, Resort, and Second Homes.
| Property Type | Hotel Condo | Fractional Ownership | Time Share |
|---|---|---|---|
| Ownership | Whole ownership One unit = one owner entity. Deeded. | Divided ownership; one unit = several fractions. Each owner has a deed for his/her fraction. | One unit = many shareholders with "right to use" for a specified length of time each year for a specified number of years. |
| Investment | Probable tax shelter; May appreciate. More income if low vacancy rate. | Fraction likely to appreciate in proportion to whole unit appreciation. No concern about vacancy rate. | Depreciates because 40 to 50% of purchase cost goes toward sale of shares (ads, commissions). |
| Use | Usually anytime. May be placed in hotel rental program when not occupied by owner. | Set time for personal use; usually 4 to 13 weeks per year, depending on size of fraction. | 1-2 weeks/year for personal use; maybe 24-50 shares per unit. May be "fixed" or "floating" time. |
| Size | Hotel-size rooms: Studios, one bedroom suites. Units may be combined to form two bed-room suites. | Generally large spacious condos and estate homes suitable for families vacationing together. May have 3-6 bed-rooms. | Suites: One or possibly two bedrooms. |
| Location | Urban business centers and heavily populated resort areas such as ocean-front or theme park resorts. | Interior resort areas offering golf and/or other sporting facilities requiring acreage. Often more exclusive private club atmosphere | Any popular vacation venue. |
| Maintenance | Maintenance relatively high. Paid year-round by owner. May be offset by rental income. | Owner pays only his or her fraction of total annual maintenance and taxes. | Management fees may apply. |
| Cautionary Notes | Do not buy for income purposes. Many factors affect vacancy rates. Hoteliers are passing vacancy risks to owners. | Do not buy if you cannot easily afford the lifestyle or want to individualize your vacation home. | Do not buy for exchangeability; owners often disappointed with other resort accommodations. Also rental and resale markets not well-established. |
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September 7th 2008 |
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