Fractional Ownership vs. Timeshare - How they Work | Pacaso

A complete guide to timeshares, fractional ownership and vacation clubs

Ashley Rappa headshot

Ashley Rappa

farm warehouse exterior
  • Share this post:
Many of us are longing for a great view, a quick dip, a deep breath — that's only some of what a second home can offer. Yet owning a whole second home is unattainable and impractical for most of us due to high real estate prices and maintenance hasslesEnter the shared ownership property industry. Its offerings include timeshares, fractional ownership, private residence clubs and destination clubs. Let’s break down how each one works, and add a smart, modern option to the mix. 

Timeshare

Timeshares, introduced in the United States in 1969, are a way to buy the right to use a vacation property for a specific amount of time. That means no true property ownership and no gained equity. Because dozens of parties own the same timeshares, a single unit could have up to 52 owners.In most cases, buying a timeshare means paying for week-long access to a condo, apartment or resort room. According to the American Resort Development Association, timeshare units sell for an average upfront unit price of $21,455, plus yearly maintenance fees, which often increase over time. The value of timeshares has long been debated. While upfront costs are relatively low when compared to owning a whole second home, depreciation is high and resale opportunities are uncertain. 

Timeshare pros:

  • Lower price tag than a traditional home
  • Condo accommodations
  • Easy booking

Timeshare cons:

  • Hefty, increasing annual maintenance fees
  • Value depreciation over time
  • Difficulty with resale

Fractional ownership

Fractional real estate ownership is a method of purchasing an ownership interest in a property with others so costs can be shared. Fractional ownership is most often seen in condo and resort communities, and while a traditional timeshare limits access to the property to one to two weeks per year, fractional ownership can allow access to the home for five weeks or more per year, depending on the number of owners per unit. Most fractional ownership properties limit ownership to 6–14 parties per unit. Each fractional owner holds an equal part of the real estate title while reducing liability toward maintenance and taxes. Because these units have fewer owners, fractional owners often have more of a say in decisions regarding property maintenance and upkeep, and many fractional properties also offer onsite storage for owners. 

Fractional ownership pros:

  • Deeded ownership
  • Value that matches market trends
  • Fewer owners
  • Onsite storage

Fractional ownership cons:

  • Higher price tag than timeshares
  • Hefty annual fees
  • Challenges when it comes to resale

Private residence club

Private residence clubs are similar to fractional properties, in that both offer ownership interest in shares of a vacation property. However, private residence clubs, frequently operated by luxury hospitality chains, add amenities typically found in high-end hotels. These clubs often sell condominiums or villas with access to the club’s golf courses or ski resorts, along with maid-cleaned rooms and turndown service. Owners also gain access to other properties in the chain’s portfolio. Entry-level prices start at around $50,000 at the lower end of the market, and can easily exceed $600,000 for a private club in a prime location. Like fractional ownership, club properties can gain equity, but like timeshares, owners face hefty annual fees, on average between $5,000 and $20,000.

Residence club pros:

  • Access to luxury amenities
  • Deeded ownership
  • Gained equity

Residence club cons:

  • Expensive price tag
  • Resale challenges
  • High annual fees 

Destination club

A destination club grants members proprietary access to its services, which in this case means high-end vacation homes on a non-equity basis in various locations around the world. Basically, your membership fees pay for you to rent a wide variety of luxury homes. Prioritizing flexibility and choice, members eschew a traditional mortgage payment in favor of membership tiers that offer levels of reservation priority, personalized services, and amenities like beach clubs, private chefs and high-end spas.Prices are similar to private residence clubs, though properties are usually luxury single-family homes. Inventory is based on availability and can sell out quickly during peak times in popular areas.

Destination club pros:

  • Single-family homes in varied locales
  • Pay-as-you go model
  • Luxury amenities

Destination club cons:

  • Pricey membership fees
  • Limited inventory
  • Rental format; no gained equity

The Pacaso difference

So that’s fractional ownership vs. timeshares vs. clubs. Then there’s Pacaso.Pacaso’s professionally managed LLC co-ownership model offers a better, smarter, more modern way to own a second home. It's as if a few families came together to purchase a home, but without any of the risk and hassle associated with the DIY co-ownership process.

Pacaso offers:

  • True real estate property ownership that moves in value with the whole-home market. As a true owner, any equity realized is yours. 
  • Ownership of a single-family home, not just the right to use a condo or hotel room. 
  • A smaller owner group. Instead of up to 52 owners with timeshares, a Pacaso has a maximum of eight. 
  • Exclusive use by vetted owners and their guests through an equitable scheduling system, with no third-party rentals allowed.
  • Dramatically lower operating costs with zero markup on items such as property management and repairs.
  • A streamlined and standardized resell approach — just like a whole home.
Pacaso puts the joys of true second home ownership within reach for more people. Check out our home listings.

Featured Articles

Exterior of Palm Springs Home
ByKasey Tross

How to buy a house with cryptocurrency

Read
White and Black modern house with large grass field
ByKasey Tross

Buying a vacation home has lots of upsides and some downs

Read

Don't miss out

The best homes sell fast. See the latest listings, inspiring second homes and buying tips.

Want to chat? Contact us.