Second-Home Alternatives

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 of a property among a group of people. While the approach most often has been applied to vacation condos and villas, the time-share concept has broadened to encompass other types of properties, from houseboats to luxury jets.

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

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

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

Time-share costs vary widely depending upon location and the popularity of the season during which owners choose to stay. Fees for 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 to time-shares (usually fewer than 15), each owner is guaranteed more time to use the property. Fractionals are usually affiliated with higher-end hotels and resorts, providing owners with access to numerous benefits and services. Fractionals are sold on a percentage-of-ownership basis. For example, a one-fourth stake allows six weeks' use.

What about destination clubs? Upscale fractional residences are often referred to as private destination clubs, but membership does not 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 posh than those offered through fractionals. The one-time membership cost is generally 80 percent refundable should you decide to leave, though annual fees are also part of the deal. While destination clubs cater to those who have the means to easily purchase a second home, their appeal springs from the diversity of locations available.

Where do exchange companies fit in? Most time-shares and fractionals are affiliated with exchange companies that allow owners to trade weeks so that they can try different time-share units. The companies charge a fee and often provide services, such as car rentals, flights, and travel insurance.

For more information, visit time-share owners' Web sites, such as

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