The 10 Commandments of Buying a
Fractional (PRC) Vacation Home

If you’ve ever thought about purchasing a vacation home and meditated on the 10 to 11 months per year you won’t be using it, you’re not alone. In fact, it is this “empty home” phenomenon that has given rise to fractional ownership, fractional shares or private residence clubs (PRCs), in which you only use what you own (and maybe even a little more). Fractional ownership, which is different from timeshare, delivers numerous benefits:

>> Lower mortgage payments (because you paid a much lower purchase price).

>> Resort amenities such as outdoor pool, golf course, spa, cabana, common lounge and other amenities giving you (for additional cost), a true resort or club experience rather than just your basic dwelling.

>> Full-time landscaping, housecleaning and security services.

>> Concierge service that will prepare your living quarters for you in advance of your arrival. (They may even remove your personal décor items from secure storage and arrange them in the home just as you wish.)

>> The opportunity to rent additional living space in neighboring homes or units for those occasions when friends and family will join you.

But for all these benefits, you need to be aware of what fractional ownership fully entails. Read these 10 Commandments of Fractional Vacation Home Buying as well as the 15 Most Frequently Asked Questions (FAQs) and you will be better equipped for making the right buying decision. Click here for a Comparison Work Sheet so you can compare fees and amenities, or click here to view PRCs on the market.

I. First Decide What you Want from a Private Residence Club (PRC)

II.  Look Into the Developer’s History

III.  Organize Your Research and Comparison-Shop

IV. Look Closely at the Share Structure

V. Look at the Entire Amenity Package (not just the one or two amenities you naturally favor)

VI.  Weigh Resort vs. Gated-Community Atmosphere

VII. Meet the Managers, Employees and Potential Neighbors

VIII. Is Your PRC Purchase a Stepping Stone to a Better Property?

IX.  Explore Beyond the Gates

X. Keep a Strong Focus on Fun and Relaxation

I. First Decide What you Want from a Private Residence Club (PRC)

The reason the vacation-property market has become so diversified is that peoples’ needs are now so varied. Some buyers are willing to pay a high price for pampering service, others can take it or leave it. There are some who are able to take vacations on short notice, others who need to plan far in advance. One couple wants to realize offsetting income from their PRC share, another wants access to additional residence units to accommodate frequent family reunions.

Project your needs and keep them in mind as you survey the prospects. As you speak with sales representatives, ask them to describe the kind of person they think is likely to match up best with their PRC property. The more clearly you see yourself in the picture the salesperson paints, the more likely you’ll be happy with that choice of property.

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II.  Look Into the Developer’s History

The private residence club market is still quite young, so you won’t find companies with long histories of success in this niche. However, the PRC segment does extend out from the resort business (and to some extend the master-planned community business) so you should be able to judge how the fractional-property segment will perform based on what kind of marks the developer has earned serving resort guests and/or full-ownership residents.

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III.  Organize Your Research and Comparison-Shop

The variables and options for a buyer in the PRC market aren’t just plentiful, they’re unfamiliar. Most people aren’t accustomed to thinking about club dues, how extensive the concierge services will be, whether unaccompanied guests are allowed or prohibited, and what (if any) reciprocal vacation opportunities come with our share. That’s in addition to the normal considerations of unit quality, price and amenities. Be prepared to take plenty of notes—perhaps even set up a grid containing all the rights, costs and privileges of each fractional under consideration.

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IV.  Look Closely at the Share Structure

You will notice in the detailed descriptions of PRC properties that a 1/12th ownership at Property A might provide 26 days of occupancy while a 1/12th ownership at Property B only provides 20 days. These differences are based in part on how much “over-share” time a club’s owners are expected to request.

“Developers structure the fractions based on expected visit patterns, and they know that members will occasionally wish to add extra days beyond what their share provides, on a space-available basis, for a set fee,” says Beth Ridenour, senior public relations manager with the Ritz-Carlton group.

One of the major distinctions separating fractional ownership from the original timeshare industry is the avoidance of a “locked-in” feeling for owners scheduling their visits. PRC developers create fractions without using up the whole year to provide scheduling flexibility, according to Ridenour. The pricing of any fraction you’re looking at should reflect the number of occupancy days, and still be competitive with other properties in a given market. 

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V. Look at the Entire Amenity Package (not just the one or two amenities you naturally favor). 

If your vacationing over the years has consisted of sampling one golf resort after another, you’ll need to look at things differently as you get ready for the interval ownership experience. When you’re skipping from resort to resort, you can basically keep doing the same few activities (golf-swim-shop, golf-swim-shop) at each one and still feel quite a sense of novelty.

But once you take up residence (even fractional residence) at a single property, you are much more likely to start exploring beyond your standard few activities and giving, say, horseback riding or fly fishing a serious try.

It’s a wonderful opportunity to add variety to your vacation activities, so use foresight as you shop the PRC market: Activities and amenities you didn’t feel ready for in the past may become favorites, and you want to be somewhere with a wide array of quality options.

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VI.  Weigh Resort vs. Gated-Community Atmosphere.

There is already an overlap between the golf resort and (full-ownership) golf real estate spheres. You can go to properties like PGA West, Cordillera or Kiawah Island and find private, high-end residential clubs alongside first-class hotel lodging and even convention facilities.

These destinations clearly appeal to a property owner who cares less about slow-paced serenity and prefers a more lively, stimulating experience. As the fractional-ownership trend gets more serious about high-end golf as a prime amenity, properties that favor both these sorts of atmosphere will be coming on-stream. Even when two properties offer basically the same array of club amenities, one may feel distinctly resort-like while the other may exude a more sedate, residential aura. 

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VII. Meet the Managers, Employees and Potential Neighbors

Because you will be returning to the same locale so often—and because club-style service is such an integral part of the PRC experience—your fellow owner/vacationers and the staff people who will serve are likely to become pretty familiar. That fact is your cue to walk around, strike up conversations and ask the front-lines managers you meet to talk about their service goals, even down to details such as hours of operation and staff-to-guest ratio.

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VIII. Is Your PRC Purchase a Stepping Stone to a Better Property?

The primary-residence sector of real estate has always had starter homes and move-up homes. That pattern carried over to gated golf communities—the Smiths will move into what they thought was their dream custom home, only to find themselves buying a lot three years later in the new community across town, eventually making that their final choice.

In vacation property, the original form of interval ownership—the timeshare—never developed a bona fide resale market. Many believe private residence clubs will be different, due to their far higher quality standards and their low probability of oversupply (especially compared to timeshare properties).

The PRC is generally presented “as a lifestyle investment rather than a financial investment,” says Ridenour of Ritz-Carlton. But she and others have noticed the valuations of existing PRC shares following the regular luxury vacation-home market. If you end up in a vacation area where, over time, several excellent PRCs get developed, you may be the grass-is-greener type who starts out at one and ends up at the other.

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IX.  Explore Beyond the Gates

This is common-sense tactic for any investor who is about to commit to a region or destination far from his primary home and place of work. Again, with so many days per year of occupancy and such a likelihood of repeat visits over many years, you are certain to go exploring far beyond what you would do at a resort you only visited two or three times. Look for other places to play golf, go fishing, shop, eat out or see a concert.

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X. Keep a Strong Focus on Fun and Relaxation

You are well aware that your purchase of a PRC share represents an investment in a deeded asset and requires a sober assessment of value and usage patterns over the long term. But you will use it for recreation and the enjoyment that recharges your batteries. The PRC you choose should have a pleasing, unstressed atmosphere in which you can kick back and forget about serious matters for a while.

For one thing, that means the golf course has to be one that suits your preferences—a course you’ll want to play over and over. Remember, people who buy full-ownership homes in golf communities still go on vacation to other destinations. When you buy a PRC, you’re most likely concentrating your vacation time and dollars in one spot. 

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