December 16, 2021 Buying

Fractional Ownership: Own your mountain vacation!

By Kate Barker with Robert Karg, Associate Broker and Owner of Coldwell Banker Rockies Realty

Fractional ownership can be an excellent and affordable way to have a vacation home in the mountains. But what exactly is it?

“Fractional ownership is designed for people who want to own a piece of a unit, either because it’s how much of the unit they need, want, or can afford,” says Robtrt Karg, Associate Broker and Owner of Coldwell Banker Rockies Realty, “Typically, people would own a slice of a particular unit on a rotating schedule.” This allows people to own what they want and what they can use. It’s a great way to own a vacation home in the mountains without forking out $500,000-$700,000 for a two-bedroom condo that you might only see a couple
times a year.

So how does it work? In Canmore, there are specific resorts with hotel/condo units that offer fractional ownership. These buildings have Tourist Home zoning, which means the unit can be rented full term or short term, or it can be inhabited full time by the owners. This type of zoning is necessary because fractional owners are spending less than a month at a time in the place, and the zoning also allows for multiple homeowners on a single condo. As a fractional owner, you can buy into the slice of the pie that suites your lifestyle, which is typically four, eight or twelve weeks out of the year. These weeks are set up on a rotating schedule to ensure all owners get access to the prime holiday weeks when it’s their turn. Each resort organizes their schedules a little differently, so it’s important to get the details before making a purchase.

All homeowners with fractional ownership pay a Homeowners Association Fee, or HOA fee. This fee covers things like condo fees, property taxes, electricity, and all the costs associated with owning your fraction of the unit. The units are managed by the resort’s property management company, and that manager also schedules weeks for deep cleaning, property maintenance, and anything else that might arise.

The resort may also reserve weeks to rent out the unit, and there are options for the fractional owner to allow renters in the unit if they’re not using it during their assigned weeks. The rentals MUST be done through the resort’s regulations, however, and the unit cannot be freely rented on sites like AirBnB or VRBO.

“If your first question is, ‘How much can I make on this?’ then fractional ownership is not for you,” says Karg, “You don’t have enough rental weeks to get a good return. If someone is looking for a rental revenue generating machine, they need to own the whole unit. Period.”

Fractional units are designed for people who want to come to Canmore, pay less than owning the entire unit, and stay in a beautiful place. The rental programs are designed to offset some of the costs of owning the fractional unit, but the rotating schedule means you won’t always have prime weeks and you won’t have the ability to generate serious income.

Karg likens it to paying wholesale for the unit. “If you wanted to come to Canmore for a vacation and stay in the Silver Creek Lodge, for example, you’d be paying close to $250/night. For a seven-night stay, that’s $1750 in accommodations. If you own the unit, you’re paying $399 HOA fee plus $100 cleaning fee for a total of $499 for that same week. That’s a savings of $1251 for a mountain getaway!” You also have deed and title, which you can sell to recoup your capital.

So how do you buy into a fractional property? Because it’s not an entire unit, most mortgage lenders and banks don’t have a product to finance this purchase. “They don’t have a suit to fit,” says Karg. “Typically, people will use a homeowner line of credit to buy a fractional ownership. It’s the simplest and closest to how you’d purchase any property.”

“At the end of the day, fractional ownership is not for everybody, but for those people for whom it works, it’s a great program to own a slice of the mountains.” It allows people to have a vacation home where they only own what they need, and what they can use. In some cases, it can be used as a steppingstone to come into the market. If someone is considering home ownership, retiring in the mountains, or moving here, fractional ownership allows them to see what it’s really like to live in the mountain town.

Fractional ownership is designed to be an affordable alternative to a vacation home. “If you’re saving $1200 every time you visit the mountains, you might come more often because it’s affordable to do so.”

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