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Fractional Ownership vs.Timeshare: Explaining the Differences to Your Banker

Despite the growing world-wide acceptance and popularity of fractional vacation home ownership, many members of the public still confuse it with timeshare.  This is especially disappointing when a fractional developer presents a financing proposal to a banker, only to be informed that the institution does not lend to “timeshare.”

The chart below attempts to make clear some significant differences between fractional ownership and timeshares so that bankers and investors will understand the following important real-world truth:  Well-conceived and well-managed fractional developments offer secure and potentially very profitable real estate investment opportunities.

  Fractional Interests Timeshares Comments

annual household

Fractional interests:



Fractional owners are wealthier and better lending risks. Foreclosure rights are the same as in whole ownership.

Number of owners per residence unit

4 to 15 owners per unit (possibly as many as 20)

Up to 50 or even 52 owners per unit

Fractional owners have a higher financial stake. They are more willing and able to pay mortgage and maintenance costs.

Amount of owner use and vacation ambiance

From 12-13 weeks per year to as little as 2.5. 3-5 weeks is most common.
People become acquainted; service is personalized.

Usually 1 week a year. (In some cases, 1 week every other year for those on a limited budget.)
Traffic and wear and tear are heavy.

With fewer owners and less occupancy, fractionals are more relaxed, intimate, and “clubby.” They undergo less wear and tear.

Unique Selling Proposition

A financially smart alternative to whole ownership of a vacation home

An affordable alternative to staying at hotels and vacation rental

Fractional buyers often can qualify for whole ownership, but prefer not to be tied to just one destination.

Financial considerations
of potential buyers

Buyers seek mid- to long-term increase in the value of their real estate and diversification of their portfolio as a hedge against inflation. Some may want rental income.

Buyers seek savings on the costs of their vacations and insulation from inflation in the price of accommodations for future vacations.

Re-sales of fractional real estate tend to track with sales prices of whole ownership vacation properties in the same market area.

Personal use vs. investment use

Both are important.

Fractional ownership enables buyers to afford a higher quality of vacation experience and frees up discretionary funds for other purchases.

Personal use is of primary importance.

Timeshares make possible vacations that might otherwise have been unaffordable or not a regular part of one’s lifestyle.

Fractional buyers want a very high-quality vacation.

They also expect to benefit from the appreciation of their real estate investment upon its resale.

Exchange networks

Are growing in popularity, but fractional buyers tend to have already established an emotional attachment to the resort or city where they ultimately buy their fractional vacation property.

Many timeshare buyers are more interested in the exchange possibilities open to them than in the particular property where they happened to have entered the exchange network.

Since affluent fractional owners feel more loyal and connected to their “home” property, they are more able and willing to spend the funds needed to maintain it in excellent condition.


Original developer marketing costs: Typically 12-15% of sales price

Can be resold through general real estate brokers (same as whole ownership).

Original developer marketing costs: Typically 50% or more of sales price

Are difficult to resell. This is changing with the entry of specialty companies into the market

Original marketing costs do not translate into “real estate” value at resale.

Investors steer clear of timeshare due to loss from original value at resale.

Sales methods

Often use low-pressure, “relationship sales” methods to build trust through repeated contacts with customers over weeks and months.

Often use high-pressure techniques to close a sale during a customer’s first visit to the property.

High-pressure sales methods are a reason many consumers choose to avoid timeshare sales offices.

Public image


Is associated with
responsiveness to environmental concerns and taking part in “the good life”


Trade associations are educating the public on the benefits of vacation ownership.

Laws protect consumers from misdeeds of early timeshare developers.

Involvement of branded hotels has increased timeshare’s respectability.

Quality of property, amenities and service

Fractional ownership properties are often similar to 3- or 4-star hotels.
PRC’s can resemble 4- or 5-star hotels.

Most offer standard resort-level service.

Newer properties may reach 3- or 4-star quality.

Due to less wear and tear and owner commitment to property upkeep, fractional interests offer prospects of a profitable real estate investment.

In summary, when dealing with potential lenders, it is important to communicate the following essential points regarding fractional ownership of vacation real estate: 

  1.  From the point of view of financial performance, fractional ownership resembles whole ownership of vacation real estate, not timeshares.
  2. Most fractional ownership properties generally deliver a higher quality of vacation experience than do most timeshare properties.
  3. The fact that fractional ownership properties and timeshares happen to be regulated in most places under the same laws is just an inconvenient truth.
  4. You can deal with this inconvenient truth by pointing out to potential lenders:

Fractional ownership caters to an affluent, desirable clientele that demands and is willing to pay for the superior vacation experience and potential investment benefits that fractional ownership of vacation home real estate offers.

What challenges are you meeting in securing fractional funding in your marketplace? How are you meeting them?  Please share your ideas and insights with fellow site visitors in the reply box below.

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2 Responses to Fractional Ownership vs.Timeshare: Explaining the Differences to Your Banker

  1. Nancy Kelley says:

    Are there monthly fees associated with these Fractional condos ?

    • Renee Disick says:

      Expenses for maintaining the common areas are usually paid monthly or quarterly by the Home Owners Association or as specified in the offering plan. What can I help you with?

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