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5 ways Lifestyle Asset Group Improves Upon the Fractional Real Estate Model

By Karla Jones

 

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A breed of vacation home ownership is once again gaining steam that allows individuals to share ownership of a vacation property. Think of it like this: A whole pie may look delicious, but it doesn’t make financial sense to buy the entire dessert if you are just having a few bites. However, if you split the cost among several buyers and ensure that everyone gets a slice, then the purchase makes sense.

That’s the theory behind the fractional real estate model, in which second homes are purchased under a multi-owner structure and cost and access to the home is shared.

Lifestyle Asset Group's "collective asset ownership" model has dramatically improved upon the traditional fractional ownership model in the following five ways: 

1) Owning an equal share in six vacation homes in six unique destinations is better than owning a fractional interest in just one destination. 

Buyers of a typical luxury fractional property buy a share of a residence within a single destination which provides them with annual usage that can range from 2 weeks to 6 weeks a year in that one location.  The ownership interests are sold as a fraction (e.g. 1/24, 1/12, 1/10, 1/8, etc.).  In other words, in the 1/8th example, the fractional seller/developer is selling 8 shares of a single residence in a single location.

Through Lifestyle Asset Group's "collective asset ownership" model, you are buying the equivalent of a 1/8th interest in not just one residence, but a pool of six residences located in six unique destinations, which is a huge benefit as it provides for greater diversity in enjoyment and investment strategy. 

It is important to note that you don’t have to be in love with all six destinations in our portfolio. Most of our shareholders acquired a share because they enjoy, at a minimum, at least one or two of the six. This works well because you can use all of your allocated usage in just St. John and New York City if you so desire. You never have to step through the door of any other residence. However, you are certainly benefiting financially from a diversified fund of six properties. That means less risk and more potential for profit.

 2) Flexible reservation system.

Each shareholder with Lifestyle Asset Group receives 30-35 nights of usage each year (or 15- 18 nights for a half share purchase) that can be allocated within any of the six residences.  You can book your vacations however you like -- 4 nights in New York City, 12 nights in St. John, 5 nights in Seabrook Island, etc. Your stays do not have to be in 7 night, week long increments, which is a requirement for most fractional developments.  This provides for great flexibility for our owners to come and go as their busy work and family life allows. 

In addition to having the ability to come and go as you please and not having to vacation only in 7 night blocks, you are not assigned any specific weeks within our model. You can freely make reservations based on availability, which is ample (we purposely under utilize the occupancy model so that at any time 30%-40% of the calendar is sitting vacant. Fractionals work to fill the calendar 100% of the time). 

You can book as far out into the future as you like, or you can check-in to a residence tomorrow. You don’t have to wait to see which weeks you are assigned each year, like most fractional developments, who release the owner’s weeks once a year for the following year and you get what you get, regardless of your real-life schedule. 

3) Access to 70 additional vacation destinations. 

Included in your ownership structure is a membership to Elite Alliance, the leader of exchange services for luxury private residence clubs, so you can trade your travel points with over 70 destinations worldwide for an endless array of vacation options.  Most, if not all, of the fractional develops who participate in the Elite Alliance network require that their owners pay for their own membership and handle the exchanges on their own, which can be a confusing process. Not only do we automatically enroll every new LLC investor into the network, we personally handle every exchange for our shareholders.

Learn More About Elite Alliance »

 4) Our model is designed for ROI. That is not the case with most fractional developments. 

Now here is the #1 way we improve upon the fractional industry:  Our model is designed to make you money when we sell the homes on your behalf after the 7-year term. That is NOT the design of the typical fractional, which are almost always a losing proposition. Let’s take a 3-bedroom villa at the Esperanza Resort in Los Cabos as an example.  Currently, Esperanza has several fractional resale ownership programs available being sold by the developer. I found 1/24th shares starting at $100k and 1/8th shares the 3 bedroom villas starting at $300k. Do the math: 24 people writing checks for $100,000 = $2,400,000.  Eight people writing checks for $300k = $2,400,000. In other words, the developer of this fractional offer will receive $2,400,000 for selling out this villa. It is called the fractional multiplier and all profit goes to the developer. 

Conversely, the LLC can buy the exact same 3-bedroom villa floor plan (with a much better location in the resort with much better views of the ocean), as a whole ownership purchase for $1,350,000. That is $1,000,000 less than what the developer is getting by fractionalizing the unit. Good for the developer, right? Bad deal for the buyer. 

That is the key difference between buying a traditional fractional offering and the value proposition with Lifestyle Asset Group. The Fractional seller makes all their money on the front end where Lifestyle Asset Group created a model that provides the buyer with the greatest potential for upside by putting 92% of their capital directly into real estate. Lifestyle Asset group instead makes their money by earning a percentage of the annual fees paid by each LLC owner. This way, Lifestyle Asset Group is 100% aligned with our owner’s interest to impeccably maintain these homes for the LLC term and continually delight our owners through the services we provide, thus creating a true partnership over the 7-year term.

 5) We have an exit plan. Fractionals do not.   

It is very difficult to resell a fractional interest. There is no financing available for fractional real estate so you have to find an all-cash buyer. It is difficult to find fractional buyers in the first place.  There is no guarantee that your fractional will retain its value because you are competing against other owners and who will often slash prices to get their share sold.  There is rarely a way a buyer of a fractional can ever recoup that initial developer mark up when selling the residence down the road. Thus the average fractional buyer loses 60-70% on their capital on the resale.

In our model the veteran management team at Lifestyle Asset Group will sell all residences on your behalf at the end of the 7-year term, with no hassles to you, at market price, and as whole ownership, thus insuring the greatest possible returns and being attractive the greatest number of buyers when the time comes to sell. 

Learn More About Our Exit Strategy »

Summary 

The Lifestyle Asset Group model is designed to make you the greatest return on investment.  We buy all residences as whole ownership (and subsequently sell the residence as whole ownership), at market price (no developer markup), with all cash transactions, with the lowest management fees, ensuring the greatest return possible owners when the homes are sold in 7 years. 

 If this resonates, we would love to talk with you. Contact us at  today at 800-318-6966 or email different@lifestyleassetgroup.com 

Topics: Luxury vacations, Real Estate Investment, Why Lifestyle Asset Group?, Collective Asset Ownership Model, Elite Alliance, Fractional Investment