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Time-shares, fractional residences,
and destination clubs offer affordable ways to buy into second homes. Understanding how they work may help you decide which best fits your needs.

What exactly is a time-share? A time-share divides ownership ofa property among a group of people. While the approach most oftenhas been applied to vacation condos and villas, the time-shareconcept has broadened to encompass other types of properties, fromhouseboats to luxury jets.

On average, a time-share has roughly 50 owners. They'reguaranteed rights to use the property for a specific period of timeper year (usually one to two weeks each). The developers choose howtime-shares are divided among owners. Here are some of the majorvariations.

• Fixed, floating, and rotating weeks. Fixed-week systemsreserve rights to the property during the same week(s) each year.Floating-week systems let owners decide when they want to use theirweek(s) within a set time frame (such as during the winter season).Rotating systems reserve different weeks each year, on a cycle. Forexample, if the cycle is set at three years, then during the fourthyear, owners revert to the same weeks they had the first year.

• Deeded and right-to-use. Deeded time-shares divideownership of the property among investors, who each own a piece ofthe real estate. Right-to-use time-shares offer a contract to usethe property for a certain number of years. Many time-shareproperties in foreign countries work under this system due to lawsprohibiting or limiting foreign ownership of real estate.

Time-share costs vary widely depending upon location and thepopularity of the season during which owners choose to stay. Feesfor property maintenance and amenities add to the bottom line.

How are fractional residences different from time-shares?Because developers admit fewer owners to fractionals than totime-shares (usually fewer than 15), each owner is guaranteed moretime to use the property. Fractionals are usually affiliated withhigher-end hotels and resorts, providing owners with access tonumerous benefits and services. Fractionals are sold on apercentage-of-ownership basis. For example, a one-fourth stakeallows six weeks' use.

What about destination clubs? Upscale fractional residences areoften referred to as private destination clubs, but membership doesnot provide ownership rights to a specific property. Instead,members buy the opportunity to stay in a wide selection of second"homes."

Destination clubs offer many extras, which tend to be more poshthan those offered through fractionals. The one-time membershipcost is generally 80 percent refundable should you decide to leave,though annual fees are also part of the deal. While destinationclubs cater to those who have the means to easily purchase a secondhome, their appeal springs from the diversity of locationsavailable.

Where do exchange companies fit in? Most time-shares andfractionals are affiliated with exchange companies that allowowners to trade weeks so that they can try different time-shareunits. The companies charge a fee and often provide services, suchas car rentals, flights, and travel insurance.

For more information, visit time-share owners' Web sites, suchas tug2.net.

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