A New Way to Jetset | Fractional Vacation Homes

Fractional ownership is powered by powerful proptech that allows for owners from all around the world to happily co-own a single luxury property. This new ownership model began popping up in 2020 and has grown in popularity ever since. 

Fractional ownership is exactly what it sounds like-owning a share of a property with other luxury travelers. Each share equates to how many weeks per year you can use the home. If you’re thinking this sounds like the timeshare trend from decades past, it’s not. The main difference is that unlike timeshare owners, fractional owners earn equity. If the real estate market is up, owners can reap a profit when they exit. Currently fractional companies report owners selling for a 12-30 percent profit. Additionally, the pool of owners for each home is a small, curated group, not the large numbers that use timeshare properties.

Fractional ownership takes away the hassle of owning a second home, especially in international markets where laws are different and long-distance property management is a challenge. Properties are held in a business structure, often an individual LLC, for each property which reduces individual liability. Fractional ownership companies serve as property managers, interior decorators and help owners sell their shares when the time comes. 

Fractional ownership allows you to enjoy owning luxury real estate, usually with a value of $2 million to $20 million. With only paying a fraction of the cost, it frees up owners to buy additional fractional properties in multiple areas of the world.

THREE UNIQUE FRACTIONAL OWNERSHIP COMPANIES

While there are a lot of smaller players in the fractional real estate market, owners can benefit by choosing a company that offers a large portfolio of properties around the globe and has robust technology in place to manage the property and scheduling of owner’s weeks.

Photo courtesy of Pacaso

PACASO

Since launching in 2020 Pacaso has rocketed to one of the largest fractional ownership companies in the world, and in just three years achieved unicorn status with a billion dollar valuation. It operates in 40 U.S. locations, Mexico and Europe and boasts an inventory of more than 1000 properties. 

It was CEO and co-founder Austin Allison’s own experience with his second home that offered the aha moment that inspired Pacaso.

“The average second home is used just 11 percent of the year,” he said. “I believed there was a more practical and efficient way for families to own a second home and realize that dream while simultaneously benefiting the communities they are part of and that’s how Pacaso came about.”

Pacaso shares entitle owners to a 1/8 ownership stake in the property. The average share price is $755,000. Pacaso furnishes and manages the property and provides a platform for owners to sell shares if they ever wish. Owners are entitled to use the property for 44 days each year, with stays capped at two weeks in peak season and an option to extend in off-peak times. The Pacaso proprietary booking system helps owners equitably have access to popular times. 

Photo courtesy of Pacaso

“Our primary competition is the whole second home,” said Allison. “A buyer who plans to use their second home for more than half of the year may find that a whole home is a better fit for their needs. However, for those who only intend to visit their second home less than half of the year may find that Pacaso and co-ownership may make more sense.”

Featured Listing:

Venetian

Miami, Florida

Located on an enviable corner lot on Di Lido island in Biscayne Bay, this 5-bedroom 6-bathroom house boasts clean lines, a neutral color palette and is the perfect blend of indoor/outdoor living. Special features include multiple terraces, lap pool, outdoor shower and a spa bathroom in the master. Offered for $754,000/share.

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Photo courtesy of Pacaso

FRAXIONED 

Fraxioned got its start in 2020 and will close 2023 with nearly 500 properties in its portfolio. One of its main differentiators is that it allows owners to rent out the property within their weeks.

“About 90 percent of our homes allow owners to either use their weeks or rent out all or part of their weeks,” said CEO Jesse Curtis. “Because of this we’re seeing a lot of investors, in addition to traditional vacationers, get interested in fractional ownership.”

The average value of homes in the Fraxioned collection is $2 million.  Shares are offered in 1/6, 1/8 and 1/10 depending on the property. The average share price is $220K. Owners get 44 nights in the property. The caveat being that you can’t book more than two consecutive weeks. Buy more shares, and that number goes up. The reasoning is to make sure no owner can monopolize a popular time like summer.

Photo courtesy of Fraxioned

To prevent owner squabbles over scheduling, Fraxioned uses a proprietary AI powered scheduling tool. 

Fraxioned also offers a Vacation Swap Marketplace among its owners so if you own in Hawaii and want to spend a week in Paris you can connect with other owners. Right now, only a direct swap is available, but within the year the company will roll out new technology allowing for a point system to make swapping within its community much easier. 

Fraxioned Listing

Kailua Kona Estate

Located on the Big Island of Hawaii, this is one of the most luxurious properties in the Fraxioned collection. The eight-bedroom, 10 bath home boasts more than 11,000 sq. ft of living space. The home is offered in 1/6 shares priced at $1.5 million per share. 

Photo courtesy of Fraxioned

AUGUST

Unlike Fraxioned and Pacaso, August takes a unique approach to fractional ownership, offering travelers the chance to buy into a collection of European properties. This model allows someone to own in Paris, Barcelona, and the French Alps with one buy-in. The company offers different tiers, from its Pied-a-terre city collection to its just launched ultra-luxury Prime Collection. Each portfolio has four or five properties.

“The best part about owning with August is the ability to switch between city, rural and alpine homes,” said August co-founder Melie Dunod. “While the South of France and Tuscany continue to prove the most popular destinations with our owners, we’re excited to launch new destinations and are currently searching for suitable properties in London and Ibiza, amongst other hotspots.”

Ownership shares range from 1/16 to 1/21 and range in cost from $380K to $1.52 million, along with a monthly service fee. The average number of weeks each owner can spend in their portfolio properties is 12. 

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Photo courtesy of August | Pete Helme Photography

Like the other companies, August relies on sophisticated technology to ensure equity in its booking system. Each share translates to 38 points per year. Points are released to owners three times per year, and weeks require different amounts of points based on the popularity of that time frame. Because there are several properties in a portfolio, it’s often easier for owners to book a super peak time like Christmas or summer months.

“Many of our clients own or have owned second homes already but see incredible value in August managing more homes for them, as it opens up homes that they wouldn’t be able to acquire and manage on their own,” said Dunod. “They appreciate that they do not have to spend their precious time managing maintenance, cleaning teams or pool filters breaking down.”  

FEATURED AUGUST COLLECTION | PREMIUM COLLECTION

Properties in the French Alps, French Riviera, Mallorca, Tuscany and the English countryside. Each home features four or five bedrooms and three to four bathrooms, making it an ideal choice for families. The current share price is $760,000. 

Photo courtesy of August | Pete Helme Photography