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Fractional Ownership, also known as Shared Ownership, is gaining popularity in New York as an affordable way for individuals and families to own a luxury property in one of the most prestigious real estate markets in the world. This article explores what fractional ownership is, some of the top fractional properties available in New York City, and the benefits of choosing this alternative to traditional real estate investment or vacation home ownership.
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What is Fractional Ownership?
Fractional ownership refers to dividing the ownership of a high-end property, such as a luxury vacation home or investment property, into fractional interests or shares that are sold to multiple owners. These fractional shares are for a specified number of weeks per year, allowing owners to use the property during their designated weeks.
The remaining weeks, when owners are not using the property, are made available as part of a rental program. Income generated from rental of the unused weeks helps offset maintenance fees and property taxes for fractional owners. Property management companies handle all operational and booking aspects on behalf of owners.
Benefits of Fractional Ownership in New York
There are several key benefits that make fractional ownership an attractive alternative to traditional real estate investment or second home ownership for those interested in the New York market:
Lower Upfront Cost
A fractional share typically costs 20-50% less than the full purchase price of the property. This makes investing in luxury New York real estate much more affordable for utmost individualities and houses.
No Responsibility of Ownership
Property management companies handle all aspects of maintaining and operating the property. Fractional owners are not responsible for special assessments, increases in taxes, repairs, renovations or day to day management issues.
Access to Elite Properties
Fractional ownership provides the opportunity to own in some of the most coveted luxury buildings and neighborhoods in New York that would otherwise be out of reach due to the steep prices of full ownership.
Real Estate Investment Potential
Appreciation in the underlying property value over time provides an opportunity for long term capital gains similar to a traditional real estate investment.
Flexibility of Use
Rather than committing to a full season at a second home, fractional ownership allows usage on more of a points system. Owners can opt to use their allotted weeks or exchange them for other domestic or international destinations through various affiliation programs.
Top Fractional Properties in New York
There are several high-end fractional ownership properties that have launched in prime New York City locations in recent years, catering to those interested in this innovative form of real estate investment and usage. Here are some of the most prestigious options:
15 Central Park West
This luxury condominium development on Billionaire’s Row overlooking Central Park started a fractional offerings in select floors starting at $1 million for a 1/8 share. Amenities include 24-hour concierge service, doorman, fitness center and children’s playroom.
Harborside, Brooklyn
This Williamsburg waterfront building features 150 fractional units starting around $300,000. It offers all the amenities of a luxury condo such as waterfront outdoor space, rooftop deck, lounge and game room alongside a Tesla vehicle share program.
70 Vestry
Located in the Tribeca neighborhood, this newly constructed building has two- to four-bedroom fractional units available starting at $850,000. Units come fully furnished and include access to a 75-foot indoor pool, gym and screening room.
50 West
In the heart of Chelsea, this boutique building has fractional units starting at $600,000 for 6 weeks’ usage annually. Features include 24-hour doormen, concierge service and private club lounge and wine cellar.
Purchasing a Fractional Share
The process of purchasing a fractional share is similar to a traditional real estate transaction but also involves establishing usage rights in the property’s reservation system. Some important steps and considerations include:
Due Diligence
Carefully review all offering documents including the fractional program’s ownership details, exchange options, maintenance fee structures and the property Management Agreement.
Finance Options
Most shares can be financed with a residential mortgage. Consider working with lenders familiar with fractional real estate loans. Some also accept all-cash offers.
Usage Rights
Determine your designated weeks of usage as well as exchange opportunities through affiliated properties and rental credit programs during unused weeks.
Closing Timeline
The closing process takes 30-90 days on average once an offer is accepted. Working with an experienced fractional broker is recommended.
Rental Income Potential
One of the major advantages of fractional ownership compared to a traditional second home is the ability to generate rental income when one’s designated weeks are not being used personally. Here are some factors affecting rental potential:
Rental Program Management
Look for properties partnered with professional property management and rental companies who handle all bookings of owner weeks.
Seasonal Demand
Prime seasons in New York like October through May see higher rental rates. Some exchanges also allow switching into multiple seasonal weeks.
Unit Amenities
Larger fractional units and those in boutique buildings with more amenities tend to command higher nightly rates.
Rental Credits
Income earned by renting unused weeks typically goes into rental credit accounts owners can use towards future stays or exchanges.
Fractional Ownership Outlook
As real estate prices in top U.S. cities continue rising out of reach for many, fractional ownership provides compelling opportunities for families to invest in and experience luxury real estate in aspirational locales like New York City. Going forward, industry experts project:
Increasing Property Inventory
More new developing aiming fractional offerings upon completion to attract global elite buyers and investors.
Emergence of Brand Names
Fractional pioneers like Destination and luxury hotel brands entering co-ownership deals to add prestige.
Higher Liquidation Values
Mature fractional resales trading at premium prices reflecting real estate appreciation and strong rental demand.
With savvy property selection and management, fractional ownership allows both enjoying the coveted New York lifestyle and potentially participating in the city’s renowned real estate value gains over the long run. For many investors, this innovative approach offers the most viable path to alighting a piece of the Big Apple’s luxury market.
