Fractional Ownership

JOE provides 2 fractional opportunities...one in watercolor and one in watersound beach. they are condos and you should simply contact a JOE salesperson from the website and they will give all the info you every wanted to know.

good luck

We are very interested in buying beach property sometime in the next 18 months. But we do not have the resources (time and money) to make sense of buying a nice beach home individually. We prefer the communities with nicer amenities (St. Joe Developments) ... but I am unsure if there are homes for sale with fractional ownership possibilities.

My questions are:
1) Are there homes for sale with fractional ownership?
2) If so, what is the best way to research them?
3) What do I need to be most CAREFUL about in proceeding with this type of purchase?

Thank you in advance for all your help!

I know of a family interested in selling their fractional condo in Watercolor. They have been very happy with the arrangement and plan to purchase a larger unit or home in WC. If interested send me a PM.

The PRC (Private Residence Club) at Watercolor consists of 11, 2BR/2B, units with 8 fractional owners for 88 total. There are 9 for sale now ranging from 155,00 to 184,000. You can't beat the location: S side of 30-a right across from beach walkover, beach club, Fish out of Water and workout facility. You want to talk to Marianne in RE office (850-231-6500) for particulars as to # of weeks/year, monthly dues, etc.. Beautifly furnished with flat screen TVs, Bose surround sound, WIFI, contemporary furnishings-high end.

Thank you for the wonderful info ...
Does anyone know the particulars on Watersound. The facts about Watercolor were great, but the zero entry pool at Watersound would make that community as better fit for us. I will definitely follow up with with Watercolor ... but any info on Watersound's fractional ownership program would be greatly appreciated.

Again, thank you in advance!

The PRC (Private Residence Club) at Watercolor consists of 11, 2BR/2B, units with 8 fractional owners for 88 total. There are 9 for sale now ranging from 155,00 to 184,000. You can't beat the location: S side of 30-a right across from beach walkover, beach club, Fish out of Water and workout facility. You want to talk to Marianne in RE office (850-231-6500) for particulars as to # of weeks/year, monthly dues, etc.. Beautifly furnished with flat screen TVs, Bose surround sound, WIFI, contemporary furnishings-high end.

Well considering that only about 3 of those units have Gulf Views it doesn't stirke me as all that attractive. Of course you do get a gym style locker to store your personal stuff.

I have an idea that probably won't work for you but I'll throw it out there anyway in case it does.

Instead of buying a fractional ownership property, you could look at properties in WaterSound (or whatever community you decide on) and offer to buy a half interest in a property that is for sale. Some owners might consider this because they really don't want to sell, but are forced to by cash flow problems, and getting rid of half their mortgage would allow them to keep it.

There's a website, halfshare.com, I believe run by some local folks, that has legal papers required for this kind of transaction available for purchase. It's more complicated than a regular transaction, the biggest hurdle being that most banks won't give you a loan so you'll need cash.

It probably doesn't work for you, but you might get more for your money if you did something like this.

The PRC (Private Residence Club) at Watercolor consists of 11, 2BR/2B, units with 8 fractional owners for 88 total. There are 9 for sale now ranging from 155,00 to 184,000. You can't beat the location: S side of 30-a right across from beach walkover, beach club, Fish out of Water and workout facility. You want to talk to Marianne in RE office (850-231-6500) for particulars as to # of weeks/year, monthly dues, etc.. Beautifly furnished with flat screen TVs, Bose surround sound, WIFI, contemporary furnishings-high end.

Let's do the math here. 1/8 for $155k to $184k. That equates to an implied value for a 2/2 of $1.2 million to $1.5 million. You can have 100% ownership in a 2/2 in Watercolor in the $700's (or maybe less--make an offer--you never know). The fractionals sound like a pretty bad deal at those prices. Prices will need to fall to less than $100k to be a good deal. Timeshares--oops, I mean fractionals--are rarely a good deal unless you buy at less than comparable units are selling for on a whole unit valuation basis.

Also, where are the fractionals in WS? I believe they were planning to build some fractionals, but I wasn't aware of any that already exist.

Yes, that is true that probably only the 4th floor ends have a gulf view, but what can you get on the south side of 30a for the price with all the amenities? I believe that the price includes a min. of 5 weeks with bonus weeks if a unit is empty - but should check - maybe more now. Also, while you do buy a share of a particular unit for deed purposes, when you make a reservation you can request any of the units that may be available so gulf view may be available. Oh, also you have a dedicated building manager to handle reservations, etc.
True the lockers aren't huge, but most people I know, and I've assisted quite a few, only keep non-perishable food stuffs and some personal items they don't want to take back and forth.

Let's do the math here. 1/8 for $155k to $184k. That equates to an implied value for a 2/2 of $1.2 million to $1.5 million. You can have 100% ownership in a 2/2 in Watercolor in the $700's (or maybe less--make an offer--you never know). The fractionals sound like a pretty bad deal at those prices. Prices will need to fall to less than $100k to be a good deal. Timeshares--oops, I mean fractionals--are rarely a good deal unless you buy at less than comparable units are selling for on a whole unit valuation basis.

Also, where are the fractionals in WS? I believe they were planning to build some fractionals, but I wasn't aware of any that already exist.

The cost of ownership in the PRC includes all maintenance, housekeeping, insurance etc.. Also, if a TV, furniture or something else goes down it is replaced. Right now there are two 2BR/2BATH condos on the south side of 30a( let's compare apples with apples ) for less than $1M (795k and 850k) and about the same square footage as the PRC units (1400 sq.ft.). These are both 1st floor units in buildings at the west end of the property, no view of course, and a little bit of a walk to beach walkover, beach club, etc.
If you want to own a vacation place at the beach with 0 maintenance and worries, then this type of ownership may be for you. Not for everyone for sure.
Not aware of any fractionals at WS.

Thanks Iqueequeg,

The halfshare.com site is very interesting. I've been thinking about selling a 1/3 or 1/2 interest in my Paradise by the Sea home, "Paradise Romantica" for a while now. It's a terrific gulf view property with a great rental history but I'd like to diversify my investments.

The cost of ownership in the PRC includes all maintenance, housekeeping, insurance etc.. Also, if a TV, furniture or something else goes down it is replaced. If you want to own a vacation place at the beach with 0 maintenance and worries, then this type of ownership may be for you. Not for everyone for sure.
Not aware of any fractionals at WS.

...Zero maintenance and worries? REALLY? Is that in writing on the contract? Will they replace the TV and furniture and other stuff for free? Once you plunk down the 1/8 purchase price is that it? No more fees? No more assessments? Seriously...what's not included in the initial purchase price?


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...Zero maintenance and worries? REALLY? Is that in writing on the contract? Will they replace the TV and furniture and other stuff for free? Once you plunk down the 1/8 purchase price is that it? No more fees? No more assessments? Seriously...what's not included in the initial purchase price?


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http://www.joe.com/web/TownsAndHomes/WaterColor/PrivateResidentsClub.htm

Black Granite,, what else is there? :cool:

The cost of ownership in the PRC includes all maintenance, housekeeping, insurance etc.. Also, if a TV, furniture or something else goes down it is replaced. Right now there are two 2BR/2BATH condos on the south side of 30a( let's compare apples with apples ) for less than $1M (795k and 850k) and about the same square footage as the PRC units (1400 sq.ft.). These are both 1st floor units in buildings at the west end of the property, no view of course, and a little bit of a walk to beach walkover, beach club, etc.
If you want to own a vacation place at the beach with 0 maintenance and worries, then this type of ownership may be for you. Not for everyone for sure.
Not aware of any fractionals at WS.

You are kidding aren't you??? NO MAINTENANCE AND NO FEES????

There certainly are fees on an annual basis and they are fairly steep to handle all those FREE maintenance items you talk about.

The question was asked, what can you buy for that price on the south side of 30A. Given that you only get five weeks of use, when you compare apples to apples, you should be able to find a 3000 sf home within a block from the beach for that price.

Warning against going in as partners with other people, especially people who cannot currently afford the full share and need to lighten the burden. If your partner runs out of money and stops paying the monthly bills, YOU are now stuck paying full share or risking foreclosure. I don't say that lightly. Even if you go in with your best friend to buy a place, you better have all of the what-ifs worked out, unless you don't mind either loosing a friend, losing the property, or both. Unforeseen circumstances can and do occur. Someone may be fat and happy today, and get divorced tomorrow, or have a costly emergency. Be careful about your partnerships.

As long as you are talking partnerships, you may as well consider a similar, yet different set-up -- forming a corporation to buy the property, and selling shares to people. The people don't own the property, but they simply own shares in the corporation. Note that when one is ready to sell, they sell the shares of the corporation, not an interest in the property, and because of that, real estate agents cannot list, nor sell the shares of the corporation. That would be a violation of Securities laws, so it might be much more difficult to market.

The question was asked, what can you buy for that price on the south side of 30A. Given that you only get five weeks of use, when you compare apples to apples, you should be able to find a 3000 sf home within a block from the beach for that price.

Warning against going in as partners with other people, especially people who cannot currently afford the full share and need to lighten the burden. If your partner runs out of money and stops paying the monthly bills, YOU are now stuck paying full share or risking foreclosure. I don't say that lightly. Even if you go in with your best friend to buy a place, you better have all of the what-ifs worked out, unless you don't mind either loosing a friend, losing the property, or both. Unforeseen circumstances can and do occur. Someone may be fat and happy today, and get divorced tomorrow, or have a costly emergency. Be careful about your partnerships.

As long as you are talking partnerships, you may as well consider a similar, yet different set-up -- forming a corporation to buy the property, and selling shares to people. The people don't own the property, but they simply own shares in the corporation. Note that when one is ready to sell, they sell the shares of the corporation, not an interest in the property, and because of that, real estate agents cannot list, nor sell the shares of the corporation. That would be a violation of Securities laws, so it might be much more difficult to market.

Whenever I read a Smiling Joe post I know it is going to contain some great information. On the selling shares idea I have to say it is a recipe for disaster in my opinion, especially for someone with little knowledge of stocks and real estate. If someone can't afford a house at the beach, they shouldn't buy a house at the beach... period. All of the timeshares and fractionals are designed to make someone other than the buyer money in every step of the process, including ownership.

Pirate, I agree, and wasn't really recommending that novices form corporations. Rather than buying fractionals, I believe your money would be better spent renting a place for the five weeks (in reality, you probably won't vacation here for five weeks), and pocketing the difference in cash. If you are looking for long term investments and cannot afford a beach house, maybe you should look for a vacant lot, with no HOA dues and fees. There are nice lots in SoWal for under $100,000.

Full Disclosure: I am a Realtor.

Let's throw up some real numbers. Not everyone should buy real estate. Being an owner of a vacation home is as much a social status or lifestyle thing, as it is an investment. I mentioned renting a place for the five weeks and pocketing the difference.

Let's compare purchasing a fractional (five weeks use) for $150,000 to renting the house, currently available for long term rent in Grayton Beach.

For the fractional purchase, you put down 20% (not like the old days), which is $30,000, leaving you a note of $120,000. Let's say you get a 30year fixed rate of 6%, to keep the math simple. Your annual expense of the interest and principle is $8,640. You really don't build much equity in the first 7 years (average length of ownership for a home), and the value of your fractional probably won't be increasing much over time (just my educated guess). Remember the opportunity cost of your $30,000. Even with a 4% interest on that $30,000, that is an additional $1,200 per year. Also remember the monthly dues and fees, and assessments when the units are refurbished. Adding up the $8,640 and the $1,200, plus another $1,500 (guesstimate of additional expenses) that is a total of $11,340 per year, for your five weeks of use of a fairly small unit.

On the other hand, the long term rental in Grayton Beach is at a cost of $1,500 per month, or $18,000 per year. However, your use is now 52 weeks instead of only five weeks. I'm not sure that it is furnished, but you could buy some old condo furniture for almost nothing, to furnish it, so lets add another $3,000 to furnish. You will also have utilities expense, so lets throw in basic cable, phone, internet, water, sewer, power at an additional $250 per month (or $3,000 per year). Now, your rental unit is up to $24,000 for the first year, and $21,000 per additional year. Rather than being tied into a major financial investment with a partner, now, you can find three other people to go in with you on the rental, costing each of you only $6,000 for 12 weeks of usage per family. So, you get 2.5x more usage at roughly half the expense, and you are not tied into a long term investment with other people. You don't have to worry about selling it if you need the cash. Also, you have a private yard and the entire house to yourself when you are there. You also have less people with whom to share the availability of the unit, so each of you can come for more holidays and different times of the year.

Pirate, I agree, and wasn't really recommending that novices form corporations. Rather than buying fractionals, I believe your money would be better spent renting a place for the five weeks (in reality, you probably won't vacation here for five weeks), and pocketing the difference in cash. If you are looking for long term investments and cannot afford a beach house, maybe you should look for a vacant lot, with no HOA dues and fees. There are nice lots in SoWal for under $100,000.

A five week vacation sounds like a great idea. There are also quite a few houses and condos on the market that would do quite well on the rental market for under 500k right now. Some of them might even come close to breaking even on cash flow. I am sure Smiling Joe could point you in the right direction if you were looking to buy.

You have gotten some great advice on this thread. I just wanted to add a little bit to one of SJ's many great points:

As long as you are talking partnerships, you may as well consider a similar, yet different set-up -- forming a corporation to buy the property, and selling shares to people. The people don't own the property, but they simply own shares in the corporation. Note that when one is ready to sell, they sell the shares of the corporation, not an interest in the property, and because of that, real estate agents cannot list, nor sell the shares of the corporation. That would be a violation of Securities laws, so it might be much more difficult to market.

Forming a limited liability corporation to allow several people to purchase a beach house together, with the idea that any of them can sell their share at any time, only works if there is no mortgage on the property. Even during the lending boom, banks were not lending directly to LLCs formed for this purpose -- they required that each member personally guaranteed the loan.

I have first-hand experience with this. Every member's name goes on the loan, and if one member decides to leave or sell his portion to someone else, that requires refinancing to get the old member's name off the mortgage or the new member onto the new mortgage. Then you have the issue of differing cost basis for different members. The kind of trading you are talking about would only work with cash. The alternative, which the OP asked about in the first place, is true fractional ownership program where individuals get their own mortgages for their portion of the property. But given all the reasons posted above, they just never sound like a good deal to me in the long run.