“Dear Gary,” a promotional letter I received began, “Just for a moment, I would like you to picture yourself surveying the Italian countryside from a place of historic grandeur and integrity.” (I did and it was lovely.) The letter went on to tell me that as members of an exclusive, European residence club, my family and I would enjoy “the consummate Florentine lifestyle by calling one of the city’s most majestic palaces your Tuscan home.” The literature went on to describe the 36 fully furnished and accessorized homes within the renovated and modernized 15th-century palace for sale.

It also emphasized the luxuries that accompany membership, including four-star facilities, world-class services and resort-style amenities that don’t come with most single-family homes. They certainly didn’t come with mine!

Upon reading the fine print, I discovered that memberships for a one-eighth interest are priced from just over $250,000 for a studio unit to around $1 million for one with three-bedrooms. That doesn’t include hefty, annual fees for maintenance, repairs and other operating expenses (property taxes and insurance, for instance), or any additional taxes, fees and charges that can add thousands more to your yearly tab.

Nonetheless, apparently this type of second home/vacation property ownership is becoming a trend, primarily in premier resort destinations such as Aspen, Colorado, and popular, high-priced metropolises such as New York City. Also known as “fractional ownership,” it enables different owners to share title to a condominium unit or single-family home. Although each owner must schedule their visits through a management company, all are able to build equity in the shared property.

The concept, which debuted about 10 years ago in Utah, offers the advantages of a second home without the high costs or inconvenience of whole ownership. Typically, these are properties that don’t make sense to buy and maintain in light of the brief amount of time the owners can utilize them. Ski resort properties are excellent examples.

Reportedly, the average Aspen ski-country house costs around $4 million, while a one-eighth share of a three-bedroom lodge in one of the area’s better fractional ownership developments runs about $430,000, plus yearly dues of about $10,000. For their money, owners enjoy carefree access to superior recreational outlets and luxurious perks, such as spa services, refrigerator restocking and airport transportation.

Not a Timeshare

Do not confuse fractionals with timeshares, as they are more dissimilar than alike. Both require an initial purchase plus annual dues and both come fully furnished. However, timeshares are merely contracts specifying a right to use a property on certain weeks (typically one to two weeks per year). Housekeeping service is rare and amenities vary greatly. Further, because timeshares usually are not transferable, they cannot be inherited when the owner dies.

On the other hand, fractional ownership is an actual, deeded interest. You can sell it, will it to your heirs, put it in a trust, or do just about anything else with it, just like any other deeded property. Fractionals are far more exclusive and tend to be larger homes with three to five bedrooms. Most ownership opportunities are offered in increments of two to 13 weeks, which don’t necessarily have to be consecutive.

Deal or No Deal?

But is this really an opportunity to invest in real estate or is it simply a good excuse to take a vacation? Many commercial real estate experts agree it’s the latter, noting that fractional ownership shares have limited profit potential. Because they are usually are sold at a 20-25 percent premium, any return on investment is likely to be modest unless property values in that particular market skyrocket.

Conversely, many proponents of fractionals claim that the potential for appreciation is significant, thanks to limited supply and strong demand. That was especially true in markets that had seen real estate values soar a few years back. For example, at one fractional ownership resort in Park City, Utah, shares that cost $130,000 in 1995 were selling for about $655,000 10 years later.

Scheduled for occupancy in late 2009, the club will consist of 45 fractional residences in one-, two- and three-bedroom floor plans. Prices range from the $100,000s to just over $500,000 for a one-twelfth deeded interest.

Fractional ownership is not confined just to real estate.

These days, numerous big-ticket items are available on a fractional interest basis. Just as a condo owner may occupy his residential unit for a specified number of days or weeks per year, a company or individual may buy or lease a fractional interest in expensive assets such as jets, helicopters, yachts, sailboats, luxury sports cars and even high-end motor homes.

While I certainly understand the appeal of owning high-priced toys and conveniences on a fractional interest basis, I can only endorse this method of purchasing real estate as a vacation option – not as an investment. However, if you think that fractional property ownership is right for you, please consult with your financial and legal advisors before signing a binding contract.

Gary Tasman is executive director of Cushman & Wakefield’s Southwest Florida office. For more information, please contact him at (239) 489-3600 or gary.tasman@cushwake.com