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janetkfish — Mon, 31 Aug 2009 18:04:00 GMT

Swine Flu - Fact or Media Hype

janetkfish — Thu, 07 May 2009 22:04:00 GMT

I should be in Puerta Vallata right now, - I'm not. Last week amid media hysteria and founded or unfounded fear the event I was to attend was cancelled. I don't blame the promoters of the event, in my opinion they made the only decision they could make. I don't really blame anyone, and re-framed my dissappointment of what was to be a great networking opportunity capped off by some much needed R and R, and took advantage of a week home with nothing on my calendar.

So why, last week at this time was the Swine Flu the only thing covered on the news? And now, a mere week later, it's a non event?
No more people have died or are prediced to die than the ordinary flu. Are we out of the woods or is this just a brief reprieve? I don't have any of the anwers to these questions, but do have to wonder how much of the media reporting the past week was real and how much was manufactured? And by whom? Oh, I've got some conspiracy theory friends who have come up with what sound to me like farfetched explanations, but who knows?

I have two very large development projects in Cabo San Lucas. I wonder what long term effect this event will have on the tourist industry in Mexico. Or will it be like many other things, Forgotten as fast as it spread. The news I mean, not the flu.

New Marketing and Fractional Real Estate

janetkfish — Mon, 02 Feb 2009 21:47:00 GMT

I constantly get asked these days what I think about fractional properties in the current economy. As an owner and developer of fractional real estate, whose current projects are for all intents and purposes on hold right now, I think, needless to say it is a very interesting time in the resort property industry, and more so in the fractional real estate industry. I'm very interested to hear what my fellow developers are thinking when we get together at the Ragatz Symposium in March. My current thoughts are along these lines. If you can hold out for what will most likely be 9 - 12 months, until the economy shows signs of life and people can get credit again, then you'll most likely be all right. I personally am working to take advantage of what I'll call "new marketing" so that when the world does return to something we recognize, I'll be well positioned to take advantage of hard work during a time when many of our competitiors are heading for the hills, burying the heads in the sand, waiting for it to blow over, or worse still, selling off or canceling projects.

So what is "new markeing?" To me it is taking advantage of current technologies and aligning them with the way people buy. It's being the trusted advisor or vendor for your potential clients, giving them no more or no less than they need. It's providing your clients with the information, and the opportunities so that they get exactly what they need. Not what they want, but in this economy, what they need. It's utilizing the web, the internet, social networking, etc. to get to potential clients in a way that provides them benefit, not provides you a benefit. You see at the end of the day, I'd rather see people satisfied with their fractional property purchase and spend many, many years enjoying their time with friends and family then to specifically benefit from them purchasing properties I may have for sale. A win for our industry is a win for us all because it is my firm belief that once people really get what fractional ownership is and can be for them, they will embrace it and eventually own a number of properties, not just one.

So enough of my rant for the day, more to come on how to specifically leverage social networking and new ways to market taking advantage of new technologies while waiting for our economy to be stimulated.... If you've got any great ideas or would like to share what you're doing to leverage the internet, specifically social networking, please post. I'm most curious...

Fractional Real Estate 101

janetkfish — Mon, 02 Feb 2009 21:26:00 GMT

Many people confuse fractional ownership with timeshare, and while they both are defined by ownership of “time” in a property, they are very different creatures. Keep this in mind: unlike most timeshares, you own your fractional property, and as the deeded owner, you benefit from greater flexibility and more time of use.

When it comes to other benefits, the level of service and amenities with a timeshare leave much to be desired. With fractional properties, you have ultra-high-end amenities and exceptionally high levels of service. You own your fractional property, and this means that you have all rights to it. You can rent it, sell it, and pass it on to your heirs. And you get to keep the appreciation.

When you look into fractional properties, you will see such terms as private residence club (PRC), destination club, timeshare, and hotel condominium.

The industry defines fractional properties as properties having a square footage price of $1,000 or under. You are considered a private residence club owner if the cost per square foot exceeds $1,000. This is a somewhat arbitrary distinction because factors such as location and brand name influence price per square foot. At Breakaway Vacation Homes we use the terms fractional ownership and fractional property to include both traditional fractional interests and private residence clubs.

Fractional properties are usually located on prime real estate and feature a far superior level of service, amenities, and luxury. As a fractional property owner, you have a luxury second home free from the worry of upkeep, maintenance, do-it-yourself services, and other chores associated with full ownership.
The other types of properties—timeshares, destination clubs, and hotel condos—are not considered true fractional properties because you do not own a deed to the actual property, just the right to use it.

When it comes to using your second home when it suits you and your schedule, fractional ownership does for the homeowner what no timeshare or solely owned property can do! You want family time at Thanksgiving in Breckenridge this year, but your scheduled time slot is for the week before the holiday? Because you work with a service-oriented management company, you can ask your management company to look into swapping time with the shareowner who owns the long weekend you want.

Resales of fractional shares historically have done as well or better than that of timeshare or whole ownership. This could be explained by the fact that resort locales rarely see depreciation, even in slow or declining markets. An investment in multiple fractional properties in diverse locations will tend to mitigate your risk. As one real estate market slows, another may see a growth in appreciation.

State of the Industry

janetkfish — Fri, 06 Jun 2008 19:12:00 GMT

I recently attended the 2008 Ragatz Fractional Interest Conference in San Francisco. I was amazed at the number of people in attendance, it seemed like more than twice as many as last year. I'm not sure just how many people were there, but it was impressive. I shouldn't have been surprised, but I was by the sheer number of the big guys who where there. Ritz Carlton, The Fairmont, Hyatt, Starwood, Marriott, they were all there, all with more and more fractional interest projects. The industry is here to stay and growing, even given the slowdown in the ecomomy and real estate market.

For those of you new to the fractional interest market, let me first talk about the key differentiators between timeshare and fractional ownership interest. Fractional interests are between 1/12 – 1/4 shares – timeshare can be as much as 1/52 share.
With fractional ownership you own the property, it is deeded most commonly with a Tenants In Common agreement or TIC. You own the property and have all the rights of ownership, you can rent, sell your share, leave it to your heirs. With timeshare you often own nothing more than a slice of time, you don’t own a given piece of property, and in many cases you purchase time on a point system which allows you to trade your points in on time in different locations. The challenge comes in getting a reservation in a location and at a time you most desire or deciding at the last minute you want to get away from it all.

Fractionals also differ in their level of amenities. Fractionals often come with concierge service which may include airport pickup, unpacking of your belongings that are store on property, a stocked bar and refrigerator with items you want, reservations made for golf, dinner, etc, in-house meal prep, once or twice daily maid service and much more. Fractional properties have very high end appliances, granite, stone, and are located in the top resort locations in the world.

The following is a synopsis of what I thought were the key points coming out of the conference. It see the official report visit www.northcourse.com and download the 2008 North American Fractional Interest Report. Special thanks to Dick Ragatz for his dedication to the industry and for sponsoring the Fractional Symposium year after year. http://www.ragatzassociates.com/

Results for the year 2007
Fractional Interest Project vs Private Residence Clubs
According to the formal report, a Private Residence Clubs are those properties in which the cost per square foot exceeds $1000. They typically have higher levels of amenities and are often associated or part of a luxury resort that also includes a hotel and full ownership properties. For the purposes of this overview, I will not differentiate between PRC's and Fractional Interests because so many Fractional Interest Projects call themselves PRC’s anyway and I don’t see a significantly different buyer for one or the other.

PROJECTS
The number of Fractional projects has increased approximately 14% since 2006 from 135 projects to 153 projects. There are a total of 300 projects of which 153 are in active sales.

SALES
Sales has increased by 8.3% to almost $2.3 Billion - note most of the growth occurred in the first 6 months of 2007. Not surprising given the economy and the mortgage crisis.
Sales from 2005 – 2006 was 7.8%. Interesting what the growth would have been if the economy and mortgage situation didn’t occur.

DESTINATION CLUBS
Destination Clubs are now 27% of the market with approximately 6000 members industry-wide. Destination Clubs differ from Fractionals or PRC's in that they are non-equity clubs. Typically you pay a large fee to join that buys you a set number of days in any of their resorts around the world. the main difference is with a Destination Club, you do not own real property, just the right to use it.
Exclusive Resorts is the largest, others include Ultimate Resorts and Quintess.

LOCATIONS
Fractional project geographic distribution looks like this:
72% of all fractional projects are in the US. Within the US:
  13% are in Colorado
  8% are in California
  5% are in Florida
  46% are in other areas

Outside the US:
15% are in Canada
5% are in Caribbean
8% are in Mexico

OBSERVATIONS
A couple of things that stood out to me that I found interesting. First being the size of the projects
Most (68%) of the Fractional projects have between 10 and 50 units. With 36% of the projects building between 10 and 24 units. I was a little surprised by how small the projects were.

It struck me just how long it takes to sell out a fractional project. Some examples:

Esperanza Resort in Cabo, 63 luxury villas offered at 1/8 and 1/6th shares began sales in 2003 and sold out in 2006
The Timbers in Snowmass, Colorado had 36 three bedroom residences offered as 1/8th shares began sales in 2000 and sold out in 2004
The Rocks in Scottsdale, AZ 40 Villas offered at 1/7th shares started sales in 2003, sold out 2007

Net net = expect the average share sales to be between 6 and 12 shares sold per month.

I believe the major factor effecting speed of sales today is lack of knowledge on the part of the consumer that this type of ownership option is even available. Having been involved in this industry for over 2 years, it still surprises me how few people I meet understand or even know this option exists. The other main factor is the confusion between fractionals and timeshare. People immediate associate fractionals with timeshare, get turned off and look no further. The answer is awareness and education.

UNIT STATISTICS
We are still seeing the popularity of two and three bedrooms between 1500 and 2000 square feet respectively.
Normalizing prices to a per week cost allows us to compare differing sizes of shares. The industry average price per week ranges from between $25k and $50k.

MAINTENANCE
Average maintenance per week ranges from $750 to $2000. Maintenance fees are up 9% from last year.The factors effecting price and maintenance are:
Size of unit – ie number of bedrooms
Location
Level of amenities

SHARE SIZE
Share sizes range from 1/12 or sometimes 1/13 to ¼ with 1/8th shares being the most common. Share sizes tend to depend on the type of market being served by the project. If the project is in a driving market, one in which most of the owners drive to the property, we tend to see larger shares such as ¼ shares where owners typically own one week a month. For flying markets, ones where people tend to fly there and stay longer, 1/12, 1/10 and 1/8 shares are more typical.

USAGE PLANS
There are many different types of ADD LINK TO USE PLAN ENTRYse Plans, from fixed, rotating, floating, hybrids, space available and many variations of these. Use Plans are key to the success of a project so do a lot of homework on what works in the area you plan on fractionalizing.

COSTS
Operating costs are much less expensive than your typical timeshare operating costs.
For fractionals costs breakdown:
54% Product Costs
17% Operating Costs

For time share the operating costs are about 55%

THE BUYER
A few words about the prospective buyer survey done of 500 subscribers to the Robb Report:
45% already own a single family vacation home
19% own are resort timeshare
18% own a resort condo
14% own a condo hotel

91% had heard of the concept
22% own or are looking
52% would consider

Beach resort most attractive at 83%
Purchase motivations:
  Own a second home at much lower cost
  Pay only for what they would use
  Good value
  Appreciation
  Level of services
Purchase hesitations:
  Can I resell?
  Will I get the time I want?
  Rental income?
  Sounds like a timeshare
  Prefer whole ownership

From existing owners
68% said were very satisfied
89% said they would purchase in hindsight

THE MARKET
There are almost 4 million people in the US who earn over $200k annually. They are the potential market for this product. To date there are approximately 50,000 existing owners of Fractional properties. The potential market is huge. I think the market for Fractional ownership is steadily growing, but I also believe the single biggest factor preventing even faster growth is the lack of awareness or the misunderstanding of what fractional ownership really is. As fractional ownership becomes more mainstream, baby boomers with high net worth retire and look for that second and third home and as the market recovers from the recent downturn the market for fractionals ownership is poised to explode.

7 Questions you should ask when purchasing a Fractional Property

janetkfish — Thu, 05 Jun 2008 20:16:00 GMT

Fractionals have transformed the vacation ownership industry over recent years and are emerging as preferred alternatives to wholly owned vacation homes. Fractional ownership attracts consumers who can afford luxurious vacation homes but can't justify the cost and inconvenience of whole ownership when their use of the property is usually limited to only several weeks per year. Learn more: Fractional Real Estate 101 .   Consumers are also drawn to the extensive amentities, five star hotel like services, high quality furnishings and finishes, desireable locations, exclusivity and maintenance free lifestyle offered by fractional projects.

While fractionals offer vacation home benefits at a fraction of the cost of owning an entire vacation home, the decision to purchase a fractional is significant. Fractional prices range from under $75,000 to several million dollars, depending on the size of the share, the square footage of the property, the location and the degree of luxury amenities provided. Consequently, your purchase of a fractional could prove to be a costly mistake unless you hve sufficient information regarding a particular fractional project and ask the right questions of the developer, the saleperson and yourself. The following 7 questions should be your guide to ensure you get the basic information you need in order to avoid the most common pitfalls and turn your purchase of a fractional into a successful, cost-effective and worry free venture.

1) Is this the lifestyle for me?
2) What is the ownership structure?
3. What is the purchase price and what are the maintenance fees?
4. What is the usage plan?
5. What amenities are included?
6. What are the rules and regulations?
7. If your purchase is out of the US, what additional things do I need to consider?

Is this the lifestyle for me?
    Buying a fractional property is truly a lifestyle choice. Whether your second home is an hour away or a days travel away, you would be wise to make sure that the property you want to buy fits in with your lifestyle and the way you will use it. I caution you to set aside the emotion for a moment and use the more rational side of your brain to consider all the factors before you make your decision to buy. I have met way too many buyers who fall in love with a property and make a rash decision because they got caught up in the emotions of the moment without taking into consideration all the factors. I'm sure I'm not the only one who has come home from vacation having just bought a week at a timeshare and got home and wondered "what DID I do?" My suggestion would be to spend some time in the location of the fractional you want to purchase to ensure the locaiton, the property and the timeframe you are buying suit your needs.

What is the ownership structure?
With fractional ownership this is rarely an issue, but still needs mention to confirm your ownership position. A fractional purchaser typically receives an undivided percentage interest in fee simple title to an individual residential accomodation or property through a Tenents In Common or TIC.  Fractional purchasers pay a one time purchase price in relation to his or her fraction, or share and puportional yearly maintenance fees that cover the expenses of operating and maintaining the fractional property. I some cases separage fees may be assessed to the use of certain amenities.

WHAT IS THE PURCHASE PRICE AND MAINTENANCE FEES?
Typically the purchaser of a fractional property pays the initial purchase price in purportion to his ownership interest, fraction or share. If you are buying a 1/12 share in a  $1.2 Million luxury slope-side condo in Aspen, your purchase price would be $100,000. Your maintenance fees would be based on 1/12 of the cost to maintain the property. Ongoing maintenance includes the expected such as, utilities, housecleaning services, basic upkeep to the property, landscaping, snow removal if applicable and the like. In most cases there are provisions for major repairs and periodic replacement of furnishings, etc, know your financial responsibilties with regards to these items. The industry averages for maintenance fees (normalized to a weekly basis in order to allow for the differing sizes in shares) range from $750 to $2000 per week. In 2007, maintenance fees were up 9% from 2006. In order to spare yourself from any unpleasant surprises, understanding your fees is critical.

WHAT IS THE USAGE PLAN?
Second only to location in order of importance in my opinion is the usage plan. When you use the property, how often and for how long is obviously critical to getting what you want from owning a fractional property. There are fixed use plans and rotating plans and space available plans. There are hybrid plans that utilize a mixture of use plans. The key is to understand your usage plan. Understand how the reservation system works to avoid dissappointment in not getting the time you thought you were entitled to. For more information on the types of use plans available stay tuned for upcoming posts.

WHAT AMENITIES ARE INCLUDED?
One of the key differentiators between timeshares and fractional ownership is the level of amenities included with fractional properties. Luxury furnishings and fixtures properly maintained, access to common area amentiies such as infinity pools, restaurants, on-site gym and spa, access to off-site activities are a few of the types of amenities typically included.   Are there memberships or discounts to associated golf courses, spas, and other activities available? Is airport pick-up available, what is included in the concierge service? Is maid service included? Refrigerator and bar stocking? Is in room chef services or massage? Know what additional services are available and what is the cost. The beauty of owning a fractional property is the feel of a five star resort, with ownership at a cost the covers only what you use. It's a beautiful thing.

WHAT ARE THE RULES AND REGULATIONS
Take the time to understand the rules and regulations regarding your property. The rules and regs are there to ensure your optimal enjoyment and that of your co-owners and neighbors. Ask for a copy of the rules and regs so that you fully understand the any restrictions regarding such things as guests, pets, quiet hours, common area useage rules and or restrictions, etc.   Know the rules around the rental and sale of your fraction share.  My recommendation is to look at the purchase of a fractional share as a personal use purchase, not an investment. Many do rent out part of their fractional to offset the cost but that is more exception than the rule. Luxury resorts in great locations as most fractional projects are generally appreciate over time.  Historically fractional resales have held their value and appreciated, but as the industry is in it's infancy there is just not that much data available to justify a purchase solely as an investment strategy.

IF YOU PURCHASE IS OUT OF THE US, WHAT ADDTIONALS THINGS DO I NEED TO KNOW?
Given the current state of the real estate market in the US, many fractional buyers are looking abroad to find their fractional home away from home. Places like Mexico and the Carribean are seeing tremendous growth in sales of fractional properties as the baby boomers begin to retire and seek warmer climates in which to retire. Before you fall in love with that beach front condo in Cabo San Lucas, do your homework. My first suggestion would be to simply spend time there. Get to know the locals, the culture, the climate. Understand the language requirements, the currency, your ownership rights as foreigners. Understand the medical services available and the quality of care. If you have special needs, make sure they can be acoomodated. Mexico for instance has a top notch healthcare system on parallel with the US, but that may not be the case everywhere. Take the time to get to know your new home and you will ensure year after year of memorable experiences.

Most of what I have included here is not rocket science, but some suggestions on the things to consider when purchasing a fractional property. At the end of the day, it all comes down to basic due diligence with some gut instinct thrown in. For a list of due diligence questions go to http://www.breakawayllc.com/paradise.html and download a chapter from Paradise By The Slice. The best of luck to you in your purchase of your home or homes of your dreams.

Welcome to our Fractional Real Estate Blog

janetkfish — Wed, 12 Mar 2008 20:19:00 GMT

Welcome to our Fractional Real Estate Blog. Our purpose is for to provide a place where folks can exchange ideas and opportunities about fractional real estate (FRE). Fractionals are red hot right now and have been for the last couple of years. Although a somewhat emerging market FRE is the fastest growing area of real estate, with sales in 2006 at over $2 billion.   Visit http://www.northcourse.com and download the 2007 North American Fractional Interest report for an update on the state of the industry.

Let's start with some frequently asked questions.

Q: What are fractionals and are they the same as private residence clubs (PRC's)?

A: Fractional real estate ownership and private residence clubs (PRC's) are essentially the same thing. The terms are used interchangeably. They allow you to use up to 3 months of home ownership priviledges at a top of the line luxury resort with incredible amenities and service but at a fraction of the cost of full ownership.

Q: Who are fractionals really for?

A:  This type of real estate property is ideal if you want the benefits of owning an impressive second home complete with personalized service and located in an exclusive community but cannot justify the investment due to limited use.

Q: What are some of the services I can expect from a fractional or PRC?

A: They offer exclusive amenities, usually including a lavish clubhouse, spa, private heated splash pool, hot tub, gourmet kitchen, tennis courts, golf course, marina, or access to a ski resort. You may have a luxury car at your disposal, chef on call, 24 hour maid service, personal concierge.  Additionally a typical fractional or PRC includes: airport pickup and drop off, pre-arrival shopping and stocking, satellite TV, wifi, surround sound, plasma TV, gourmet kitchen appliances, granite, and the list goes on.

Q: How much time do I get with a typical fractional?

A: Most fractionals or PRC's are between 4 and 13 weeks. There are basically two kinds of markets for fractionals. What I'll call driving markets are markets where owners would drive to their second home. Markets like Lake Tahoe and Aspen are primarily driving markets where most of the owners are within 3 hours drive. In driving markets you frequently see 1/4 shares in which the owners would own one week each month on a rotating basis. Week one the first year, week 2 the second year etc.    Flying markets are markets where people fly in and spend more consecutive time. In those types of markets you are more apt to see 1/8 - 1/12 shares. People in these markets tend to come and stay for a longer duration of time.

Q: Where are fractionals or PRC's located?

A: They are primarily located in world class resort destinations around the globe. Cabo San Lucas, Puerto Vallarta, Aspen, Lake Tahoe, Costa Rica, etc. Increasingly we are seeing fractionals pop up in major cities such as New York and San Francisco.

Q: How can I learn more?

A: Good question, to find out all that is new in Fractionals and PRC's and to network with the leaders in the industry, don't miss the Ragatz Fractional Symposium next week in San Francisco. http://www.ragatzassociates.com/conference.htm