What is fractional ownership? Fractional ownership condos are condos that are co-owned between two or more people.
Typically, this type of investment, when applied to condos, is for vacation homes that families or individuals can share throughout the year.
If you enjoy the convenience of condo living while on vacation but are hesitant to purchase a home that you will only spend a part of the year in, fractional ownership condos may be a sound investment for you.
However, before you jump into a fractional ownership deal, there are a few things you must carefully consider.
Buying into fractional ownership condos with a good friend may sound like a good idea, however put the friendship aside and treat it like a real estate business deal.
Prepare all the documents together so each party knows the terms, conditions and financial information.
Discuss how you will split not only the mortgage but the condo fees as well.
Fractional ownership condos have certain costs covered by the condo fees, but you may still be responsible for some maintenance items.
Find out what those items are and discuss a plan for preventative and regular maintenance.
Also create a financial contingency for unforeseen issues and ensure both parties contribute to this fund.
If the oven quits working or the flowerbeds need planting, who is responsible for the money and the time for those types of issues? Having a good talk and drawing up a legal agreement prior to purchasing fractional ownership condos will prevent disputes about who is responsible for repairs and other issues that arise with home ownership.
All purchasers must read the by-laws and (if applicable) the reserve fund study.
While this is not exactly exciting reading material, it will give you a very clear idea of your financial responsibilities and if a special assessment is likely.
If your condo is assessed due a structural or other major issue, all co-owners should be willing to share in the assessment fee.
Another thing to discuss with your co-buyer(s) is a schedule of use.
Do not assume that your condo will be empty and waiting for you if you have not worked out which months or weeks are exclusively yours.
Your spontaneous condo getaway with your spouse could come become an uncomfortable weekend if you find yourself sharing your condo with your co-buyer's son and his girlfriend.
Be sure to discuss what will happen if one or more buyer(s) decides to sell their share of the fractional ownership condo.
Does that buyer take the entire profit or is that profit shared among all the buyers? What if all buyers decide to sell? Will you involve a realtor or will you list on ComFree? If only a share is being sold, does the other owner have a say in who can purchase and share in the ownership? Fractional ownership condos make wonderful investments and provide a luxury vacation home in a beautiful location but many a good friendship has come to ruin when money and co-ownership created misunderstandings and resentment.
Having a few open and honest discussions and drawing up legal agreements prior to purchasing fractional ownership condos will prevent disputes, lawsuits and tension between co-owners and friends.
Typically, this type of investment, when applied to condos, is for vacation homes that families or individuals can share throughout the year.
If you enjoy the convenience of condo living while on vacation but are hesitant to purchase a home that you will only spend a part of the year in, fractional ownership condos may be a sound investment for you.
However, before you jump into a fractional ownership deal, there are a few things you must carefully consider.
Buying into fractional ownership condos with a good friend may sound like a good idea, however put the friendship aside and treat it like a real estate business deal.
Prepare all the documents together so each party knows the terms, conditions and financial information.
Discuss how you will split not only the mortgage but the condo fees as well.
Fractional ownership condos have certain costs covered by the condo fees, but you may still be responsible for some maintenance items.
Find out what those items are and discuss a plan for preventative and regular maintenance.
Also create a financial contingency for unforeseen issues and ensure both parties contribute to this fund.
If the oven quits working or the flowerbeds need planting, who is responsible for the money and the time for those types of issues? Having a good talk and drawing up a legal agreement prior to purchasing fractional ownership condos will prevent disputes about who is responsible for repairs and other issues that arise with home ownership.
All purchasers must read the by-laws and (if applicable) the reserve fund study.
While this is not exactly exciting reading material, it will give you a very clear idea of your financial responsibilities and if a special assessment is likely.
If your condo is assessed due a structural or other major issue, all co-owners should be willing to share in the assessment fee.
Another thing to discuss with your co-buyer(s) is a schedule of use.
Do not assume that your condo will be empty and waiting for you if you have not worked out which months or weeks are exclusively yours.
Your spontaneous condo getaway with your spouse could come become an uncomfortable weekend if you find yourself sharing your condo with your co-buyer's son and his girlfriend.
Be sure to discuss what will happen if one or more buyer(s) decides to sell their share of the fractional ownership condo.
Does that buyer take the entire profit or is that profit shared among all the buyers? What if all buyers decide to sell? Will you involve a realtor or will you list on ComFree? If only a share is being sold, does the other owner have a say in who can purchase and share in the ownership? Fractional ownership condos make wonderful investments and provide a luxury vacation home in a beautiful location but many a good friendship has come to ruin when money and co-ownership created misunderstandings and resentment.
Having a few open and honest discussions and drawing up legal agreements prior to purchasing fractional ownership condos will prevent disputes, lawsuits and tension between co-owners and friends.
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