Among the many motivations for purchasing a second home, buyers must consider the financial implications of owning a real estate asset. This post will focus on a second home as an investment and income opportunity. Subscribe to our blog so you don't miss our upcoming post, which will cover the costs side of the equation.
Cantissimo Senior Living Blog
Cantissimo Senior Living blog - an educational resource for older adults in lifestyle, wellness, and more.
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Second Homes: What Is Fractional Ownership?
Fractional Ownership is an emerging partial ownership model. The concept has gained popularity in the past two decades as companies have marketed vacation homes specifically to be sold as fractional ownership properties. Private parties can independently organize fractional ownership arrangements, but the latest marketplace buzz has arisen from commercial ventures.
How Does Fractional Ownership Work?
First, a company will purchase properties or develop them from scratch. Then, a limited liability company (LLC) is formed based on each property, and shares are marketed. Each share represents the number of days/weeks annually the share owner can use the property. For example, if there are ten shares, each owner is entitled to five weeks per year at the property. (This assumes maintenance consumes two weeks per year when the property is unoccupied.) Owners can typically buy more than one share if desired. In this case, an owner of two shares could have rights for ten weeks annually.
Second Homes: Full vs. Partial Ownership
It's common to think of acquiring a second home as a full owner. In its purest form, full ownership of a second home means only one person's name on the title and the mortgage. However, it is not unusual for couples to have both names on the home's legal documents and still consider it a full ownership situation.
Nevertheless, there are also types of partial ownership where more than one person has rights to the real estate asset.
"Partial" or "multiple" ownership means more than one person owns a home together. These people could be siblings, parents and their children, other family members, friends, business partners, and even people who have no relationship to each other except as co-owners.
Partial ownership arrangements often arise when individuals cannot afford a second home independently. While a co-ownership deal might help you achieve an otherwise unreachable goal, it is usually more complex than full ownership.
There are three primary ways second home partial ownership can be handled:
Second Homes: Buy or Rent?
Many assume a second home means purchasing a house, condominium, or mobile/manufactured home. However, there are those who have long-term rentals that they call their second home.
Can a Rental Be a Second Home?
Can you realistically consider a rental to be a second home? The answer is "yes!" Just as primary residence renter (e.g., houses or apartments) consider their abodes to be home, there is also the option of renting your second home.
When does a rental become a second home versus a vacation or other temporary arrangement?
What Are the Different Types of Second Homes?
As noted in a recent post, Should I Invest in a Second Home?, a second home can take many forms.
House or townhouse
Condominium or apartment
Recreational vehicle or trailer
In this post, we’ll closely examine each of these alternatives.
Should I Invest in a Second Home?
Enthusiasm for second homes boomed during the COVID-19 pandemic due to the millions working remotely and low mortgage interest rates. While less favorable rates have cooled the market, many people continue to explore the prospect of a second home as:
- A getaway from the dreary day-to-day routine
- An escape to better weather
- A future retirement location
- A way to be closer to family
- An investment or income opportunity
- An opportunity to join a new community and build relationships
Often, it's common that a combination of these reasons motivates interest in a second home.
If you're curious about the second home option, it's important to understand the details of what establishing a second home entails.
How to Acclimate to Your New Home After a Move
Whew! You have finally moved into your new home. You'll be living out of boxes for a while, but hopefully, all the planning and effort paid off.
While putting up your feet for a well-deserved rest, take a few moments to think about how you'll adapt to your surroundings and establish new routines.
Preparing for Your Next Move: What You Need To Know
Moving in your younger years probably meant simply recruiting a pickup truck-owning friend with the promise of pizza and beer. Now past age 50, moving takes on a bit more complexity. It requires forethought and planning to reduce the chance of a stressful experience. In this post, we'll cover four phases for making a move:
- Downsizing (if necessary)
- Other pre-moving day preparations
- Moving day
How To Evaluate a Senior Living Arrangement
As noted in a recent post, Moving in Retirement? How To Decide Where To Go, the state of your health might dictate the location for your next move. After a frank health assessment, you can decide which alternatives make the most sense for your situation.
- Home Healthcare
- Adult Daycare
- Assisted Living
- Skilled Nursing Care
- Memory Care
What To Consider When Moving to a New Home in Retirement
So you've decided to move. Congratulations! You are about to embark on a great adventure. However, you have many more decisions ahead.
- Are you moving near to your current home or further away?
- Are you downsizing, upsizing, or maintaining similar square footage?
- Are you renting or buying?
- Are you adding a second home?
- What about timeshares or fractional ownership?