FRACTIONAL OWNERSHIP
Key to Your Beach Home?
by Joyce Deaton

If you spend time boating and fishing on the Cape Fear coast, chances are you share the daydream of most who visit - owning your own home at the beach. But with home prices soaring in coastal areas, the beach-house dream is increasingly becoming out of reach for all but the most affluent of buyers.

A new idea in vacation home buying promises to bring that dream back within the grasp of many. “Shared,” “fractional” or “interval” ownership is growing rapidly in the U.S. and has recently found its way to the North Carolina coast. Here's how it works: Each purchaser buys an interest in a fully furnished beach home and is entitled to occupy the home each year for the share interval purchased.

For example, Realtor® Joe DiBenedetto of Coastal Dreams Realty of Carolina Beach is offering “Cool Sailings,” a 3,900-square-foot, five-bedroom, three-bathroom home a half-block from the ocean for sale to 13 fractional owners. Each owner can occupy the home for four weeks a year. Through an annual fee, owners share property management and maintenance costs including refurbishing, utilities, weekly cleaning, taxes, insurance, cable and internet connections.

Fractional ownership of vacation homes is an outgrowth of the practice that began several years ago in the purchase of executive jets and yachts. The idea that you purchase only the weeks you want to use your vacation home - seems to be resonating with U.S. buyers. According to Rogatz Associates, a Eugene, Ore. company that conducts research in the industry, 64 percent of the 138 fractional ownership resort properties in the nation in 2003 had been developed in the previous three years. In 2002, according to Vacation Ownership magazine, developers sold $357.9 million in high-end properties through fractional ownership - a 45 percent increase over the previous four years.

DiBenedetto is quick to point out the advantages of fractional ownership. Buyers can enjoy the benefits of a large, luxurious, professionally decorated home for a small fraction of its cost. Since most owners of beach homes use them only about four weeks a year, he says, this arrangement gives them what they want but frees them from having to maintain and rent the property when they are not using it. “We like to say, ‘Own your vacation home without it owning you,'” he explains.

Here are the nuts and bolts of fractional ownership:
• You become the exclusive owner of the share you choose. You own your share outright and receive a general warranty deed, which is recorded in the county where the property exists.

• You can finance your share with a mortgage, just like you would for an entire home.

• If you don't want to use all your weeks, you can rent, sell, exchange or give them away just like any other real estate, and you can bequeath the property to your heirs.

• If you'd like access to your home for more weeks, you can buy more than one share.

• You become a member of your home's private homeowners' association,through which you and the other owners have total control over your property.

• Homes are refurbished, and furnishings and equipment are replaced at the discretion of the homeowners' association.

• Your maintenance fee includes weekly cleaning and linen service, so your home is always clean when you arrive, and you can leave without having to clean.

DiBenedetto says many families who own second homes in resort areas find whole ownership a problem. It may simply cost too much. It's difficult to keep up a home from a long distance away. Renting can prove difficult and costly if tenants don't properly care for their home. They may find over time that they simply don't want to go to the beach or the mountains as often as they thought they would. For these people, fractional ownership seems ideal. They have the advantage of an investment that will appreciate with the market, yet they are free from the headaches of maintenance.

Affordability is a key advantage. The typical buyer can enjoy a more luxurious home than he or she would be able to buy. For example, says DiBenedetto, a share in his Carolina Beach ocean-view fractional sells for $125,000, while a new two-bedroom, two-bath condo in the area with a comparable view sells for $400,000 to $500,000, and a similarly situated three-bedroom, two-bath condo sells for about $1 million. “For a fraction of the cost of a smaller home, our buyers can enjoy a professionally decorated luxury home that will sleep 16, with all cleaning and maintenance provided.”

How is this idea different from a time-share property? In almost every way, he says. “Time-shares are typically owned by a developer, and what you're buying is vacation time. You can buy your share for a few thousand dollars, but you generally have no ownership of the property. If it appreciates, you don't get any benefit from that.” And, although fractionals can be sold with any number of buyers, typically you're going to have more weeks in your property than you would with a time-share. Cool Sailings, for example, provides each buyer with four weeks a year-on a rotating calendar that moves forward one week each year.

“The real difference is a question of lifestyle,” he says. “We don't sell these homes at the end of a 90-minute high-pressure sales pitch that ends with your writing a check. Interval ownership is for people who are at a point in their lives where they can afford to spend several weeks at the beach. They want to come to the same place every year with their kids or grandkids. They know where the good restaurants and fishing holes are. They want an investment, and they want control over what happens with that investment. They're intelligent enough to realize that if they only want to come to the beach a few weeks a year, it's a lot less trouble to own this way.”

DiBenedetto and his wife Michelle backed into the interval ownership idea through their own love for the Carolina coast. In fact, the home they're selling is the home they lived in until recently. They moved to Carolina Beach from Washington, D.C. in 1997 when Joe tired of working for the government and they realized they could run Michelle's mail-order business from any location. When the business grew and they felt the need to move to a bigger place inland, they hated to go.

“We were sitting on the beach in October, and we wondered how we could sell our house but keep a share of it,” he says. “I started doing the research, and eventually earned my broker's license to focus on shared-ownership properties. I found out that shared ownership is very big in the Caribbean and in Florida and the ski areas.”

The DiBenedettos will be a part owner in Cool Sailings, and Joe will act as property manager for the first year.

“One of the keys to successful shared home ownership is a responsive property management company, and we felt it was important to have things set up for one year,” says Joe.

Since beginning a marketing campaign in April, DiBenedetto says he's had a good response. He's aiming for sportsmen and eco-tourists he thinks will enjoy the island's natural attractions at Ft. Fisher State Recreation Area, Carolina Beach State Park and Freeman Park. “There's great fishing, kayaking and crabbing and clamming, and there's good access to the ocean through several large marinas,” he says. “And with 12 miles of trails in the state park, this area is one of only a few places in the world where you can see the Venus Flytrap and the Pitcher Plant growing wild.”