Fractionals – FAQ

1. What are fractionals?

Fractionals are the undivided, fee simple interest in a specific property that is shared with other owners. The concept was started in 1994 and is now the fastest growing segment of the real estate industry. They are the solution to second home ownership.

Although the length of time varies from state to state, in Hawaii , the minimum purchase is 60 days.

2. What does a fractional cost?

Fractional ownership costs are quite reasonable because they are based on partial ownership for homes/condos that are not affordable to most people. The prices on Kauai vary from $110,000 – $400,000, depending on the location and amenities.

The condo that is now available at The Plantation of Princeville, Unit #621, is a firm $180,000 and is for rotating months which allows owners to come at all times of the year. If they would prefer two consecutive months, they are free to trade with other owners.

3. How is a fractional financed?

Although most people who purchase fractionals do so on a cash basis, there are more lenders available. The property is appraised at 140% of the fair market value, and up to 75% of that amount may be loaned.

A 25% deposit is for lenders who offer full documentation, and a 30% for those who prefer to use stated income.

An annual budget is established that covers all expenses, including a contingency fund for unexpected expenses. It is paid on an annual basis.

4. Who buys fractionals?

Fractionals are ideal for people who want more than a timeshare but less than whole ownership. Also, they may not be able to afford to invest $600,000 to over $1 m for a second home where they would have limited use.

With fractionals, you are only buying the time you want to use, and, if you are not able to use the full 60 days, you are free to rent it out to vacationers using a daily or weekly rate of your choice. Therefore, you have the potential of covering all your expenses and enjoying a “free” vacation.

5. Where are fractionals?

Most fractionals are in resort areas. They are very popular in Colorado , California , Florida , Mexico, Nevada , South Carolina , Utah , the Virgin Islands, and now Hawaii.

6. What is the difference between a fractional and a timeshare?

A timeshare is when occupancy time is sold by the week. Normally, banks do not grant loans for timeshare properties because they are considered depreciating assets, and fractionals appreciates in value.

Here are some of the many benefits of a fractional home:

* Property Deed – therefore, you may pass it to family and friends or resell it with a broker

* Much greater chance of property appreciation

* Longer amount of time to enjoy the property

* Cost-effective way to stay in resort locations

* Fully-equipped kitchen, large closets, individual storage lockers for personal items

7. How are fractionals managed?

Fractionals are managed by companies that deal with vacation rental businesses. They handle all of the normal cleaning in between each owner and can keep personal items in storage when the owners are off island.

8. What are the advantages of owning a fractional?

When you purchase a fractional, you eliminate the concern of having to rent ten months out of every year. You are only paying for the time you use so don’t have the expenses and responsibility for the rest of the year. Most owners take better care of homes than renters; therefore, there won’t be as much wear and tear from vacationers.

9. May I sell my fractional?

Yes, you may sell your investment just like you would your own home. Since you are buying on a resort island, you can safely assume that you will benefit from inflation. Kauai will always be an exotic, magical, healing island where people from around the world gravitate. Therefore, it should be relatively easy to find buyers when you are ready to sell your portion.

FRACTIONAL INTERVALS FOR THE PLANTATION UNIT 621

Each of these intervals is offered at a firm price of $149,000. 

Interval #1               January 6 – March 7         SOLD

Interval #2               March 8 – May 7

Interval #3               May 8 – July 7      

Interval #4               July 8 – September 6      SOLD

Interval #5               September 7 – November 6

Interval #6               November 6 – January 5

Owners may trade their interval with other owners once all the units have been sold.

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