Take a pass on fractional ownership

The New York Timesreports that fractional ownership of real estate -- which the newspaper calls a "step up from timeshares -- is gaining popularity among home owners desperate for cash. You get to keep living in your house for at least part of the year, reduce your debt load, and pocket some cash.

But there are big drawbacks too. The Times reports that "Preparing to sell a portion of a house isn't as seamless as putting the entire house on the market for whole ownership. For one thing, insurance can prove difficult to obtain from an existing provider, so sellers may have to shop around for a new policy. There are also local, state and, in the case of foreign countries, national laws to contend with when breaking up a property for sale.

Homeowner association rules may affect the sale, while state laws covering timeshares may require an owner to register with the state and even submit all advertising for the property for approval."

This sounds like a huge pain in the butt for pretty marginal upside. Fractional ownership is generally seen as a poor long-term investment because it's so illiquid. It's hard enough to find a buyer for an expensive home right now -- Imagine trying to find a buyer for an expensive home 12 weeks of each year. The difficulty in securing financing for fractional ownership also makes it a tough investment.

Add in the headaches and commitments associated with owning real estate, and this fractional ownership idea just isn't very good at all. If you want to go on vacation in the same place for a few weeks or months each year, buying a small condo or cottage and renting it out when you're not there is a much better bet than fractional ownership.

If you don't want to do that, vacation the old-fashioned way: Rent a hotel or house and have fun.
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